By Gina Jordan
http://stream.publicbroadcasting.net/production/mp3/wfsu/local-wfsu-894568.mp3
Tallahassee, FL – A gloomy report from a government watchdog group calls Florida's property insurance system "broken." Florida Taxwatch joined with a handful of Republican lawmakers at the Capitol Monday to push for reform. They are offering legislation and recommendations to keep the state's insurance programs financially viable.
The report is called "Florida's Financial Exposure from its Self-Insurance Programs: Citizens Property Insurance Corporation and the FL Hurricane Catastrophe Fund." Taxwatch President and CEO Dominic Calabro says the findings show that Florida is facing a property insurance crisis.
"The rates and assessment capabilities of the Citizens Fund and the Cat Fund are simply inadequate to cover the enormous potential liabilities and frankly, likely liabilities."
The report is the result of Chief Financial Officer Alex Sink asking Taxwatch and its Council of Economic Advisors to look at the inherent risks of the state's property and casualty insurance policies. Calabro says Floridians are forced to choose between affordable state-provided insurance and more solvent private insurers that have the capital to meet demands. The Taxwatch analysis suggests Florida may be one major hurricane away from having to depend on federal relief or worse.
Calabro said, "Given a $14-trillion federal debt and the recent federal healthcare legislation, it's unlikely that the federal government is going to just quickly step in to help any state, let alone Florida, for not taking the proper responsibility on its own."
The analysis shows that repaying the bonds needed to finance shortfalls in the Cat Fund would cost Florida almost $4-billion annually, resulting in a loss of more than 70,000 jobs. So Taxwatch has some recommendations. They include keeping Citizens Corp. as the insurer of last resort, supporting programs that encourage owners to strengthen their homes against high winds, and stopping Citizens Corp. from insuring new structures in high-risk areas.
Hoping lawmakers will act during this session, Representative Dave Murzin said, "This public option we've created for managing hurricane risk isn't working. Through Citizens and the Cat Fund, Florida's government has taken on billions of risk it can't pay for. If one hurricane hits in 2010, we face the real possibility that consumers won't get claims paid, and the state's financial condition will be even more impaired."
Floridians are still paying taxes to cover hurricane damage from the very active storms seasons of 2004 and 2005. Representative Bill Proctor is joining Murzin in sponsoring legislation that would essentially deregulate private insurance companies, giving them more leeway to raise rates, with some caps on increases.
Proctor said, "Low cost insurance may be the most expensive type a person can buy, particularly if that claim cannot be paid. Based on the statistics and the evidence we looked at last summer, it's reasonably clear that Florida could have claims it could not pay, and for that reason I think our current policy probably is the greatest threat we have to any economic recovery that may be on the way."
Last year, similar legislation that would have allowed private companies to raise premiums without any oversight was vetoed by Governor Charlie Crist. His office says he remains opposed to any such plan, and he even testified briefly before a Senate committee, saying the measure should be called a rate increase bill. But supporters, like former Representative Don Brown, say it's about consumers having a choice. Brown once chaired the House Insurance Committee, and he says the state is in a far more precarious situation than most people realize.
"79-percent of the risk in Florida is located in coastal counties. When compared to Texas, Louisiana, Mississippi, South Carolina, we really are in a league by ourselves. We represent, in Florida, almost 50-percent of the total wind risk in the nation."
Taxwatch's Dominic Calabro says low rates are important, but they need to be priced for the risk. He says it really is a case of pay a little now or pay a lot more later.
"The cost of not paying for this up front is potentially, certainly serious, but it's potentially catastrophic."