Florida Times Union
December 23, 2010
Gov.-elect Rick Scott has been saying for months, “Let’s get to work,” to grow our economy, reduce government intervention in the market and create jobs.
One area that he and our new legislative leadership can start to work on immediately is to eliminate the unfair “hurricane tax” on businesses.
These taxes take the form of assessments levied on the insurance premiums of businesses statewide, as well as on charitable organizations, schools, churches and renters.
They, in effect, subsidize many of our state’s most fortunate homeowners living on the coast.
Eliminating the hurricane tax will free funds for business to reinvest in new initiatives and jobs, encourage capital formation in our state and foster a more transparent, competitive and fair environment for businesses and consumers alike.
When he takes office, Scott needs to seek reforms of the state-sponsored Citizens Property Insurance Corporation and the Florida Hurricane Catastrophe Fund (CAT Fund).
Today, our businesses are still paying for the storms from 2004 and 2005 because of the debt burden designed in the structure of Citizens and the CAT Fund.
Although 2010 was the most active storm season in 150 years, Florida was spared from any storms making landfall. Had our vulnerable shores been hit, Florida businesses, churches and families would have experienced an unwelcome “surge” of new hurricane taxes to fund Citizens and the CAT Fund.
Potentially, these taxes could exceed 50 percent of the insurance premium on our businesses – each year for up to 30 years – to service the bonds that would be issued.
Prior to the election, Scott said, “I will return Citizens to the insurer of last resort, level the playing field so that solvent private insurers are allowed to compete with each other for business, not with the subsidized and financially unsound government-run insurance company.”
As we return Citizens to its original role as an insurer of last resort, we must also return the CAT Fund, currently a taxpayer agency of first call, to its role as an emergency buffer for the largest possible catastrophes.
Under the last administration, the exposures in Citizens have increased astronomically and the CAT Fund has nearly doubled in size, posing a painful current and enormous contingent tax burden on Floridians.
But it didn’t have to be this way.
Louisiana, which bore the brunt of Hurricane Katrina’s wrath, also has a state-run insurer named Citizens.
While Florida made our state-sponsored Citizens into one of the largest insurers in the country, Louisiana kept its Citizens as a market of last resort.
Instead of supplanting and competing with the private market, Louisiana maintained a stable, even-handed environment for insurers and attracted new capital, new competitors and new employers.
As a result, Louisiana’s Citizens has a market share that is below its pre-Katrina levels.
Reforming Citizens and the CAT Fund are not the only challenges confronting Florida’s property insurance market. We need tort reform and changes in our so-called “bad faith” law.
But there is no better place to start than by reducing the risk associated with these state-run insurance entities and eliminating the risk of future hurricane taxes.
Barney T. Bishop is president and CEO of Associated Industries of Florida, a Tallahassee-based group that promotes free markets.
http://jacksonville.com/opinion/letters-readers/2010-12-23/story/guest-column-property-insurance-reform-should-be-priority
