Proposed Hurricane Catastrophe Fund Changes Put On Hold
When it comes to insurance, Florida has had more than its share of trouble. Some insurance programs are struggling with fraud. Others are facing difficulty staying afloat in a hurricane prone zone. A panel of lawmakers took up the second of those issues Tuesday when they talked about legislation involving the state's hurricane catastrophe fund.
The Hurricane catastrophe fund was created in the early 1990s after Hurricane Andrew to make sure insurance companies are willing to work in a state like Florida that has a lot of risk. Now it’s a pot of money that’s used to help insurance companies pay claims that are filed after a catastrophic event, like a major hurricane. But some say the fund has gotten too fat. Now, they’re working to slim it down. A measure proposed by Senator Alan Hays (R-Umatilla), would decrease the amount of money the state would be on the hook to pay from the current $17-billion, to $16 billion and it would also change the fund’s name in order to make things easier when it comes to bonding, which Hays said in the event of a major storm, the state would have to do.
"When we have a $17 billion dollar maximum coverage, we’re essentially telling the insurance company we will insure their risk up to that amount. And we have only about, I think, $8.6 billion in CAT Fund reserves, so the difference between that $17 billion and that $8.6 is what we’re going to have to borrow,” Hays said.
Florida Insurance Consumer Advocate, Robin Westcott said she likes Hays’ plan. Her staff estimates the change would lead to only about a one-percent increase in market rates. But Senator Jeremy Ring (D-Margate) has a different plan. He’s sponsoring an amendment to take things in a different direction.
“This strike all amendment does almost the exact opposite of what Senator Hays just explained. First thing it would do is this amendment would take down the level of retention fund from 7.5 billion to five billion and it would allow the bonding to go out three years from one year,” Ring said.
Ring said his plan helps to better align risk and rates. He said it lets the state sell more reinsurance, or insurance that is purchased by another insurance company to help manage risk, at a lower rate. He hopes that would lead to a reduction in policy rates. And he says bonding out further could help to take care of an increased risk that would go along with the lower retention rates he’s proposing. But some opponents said Rings plan could backfire and wouldn’t necessarily mean lower rates. And Senator Tom Lee (R-Brandon) said he’s not sure lawmakers should be doing much of anything this year.
“I think that what we’ve already done in Citizens that’s going to increase insurance rates is enough for this session,” Lee said.
Ring's amendment passed—essentially changing the direction of the measure and Senator Hays asked to temporarily postpone the bill. Meanwhile, a bill in the House that’s similar to Hays' proposal is moving forward.
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