Florida TaxWatch President & CEO Dominic Calabro said today that he supports Chief Financial Officer Tom Gallagher and state lawmakers in their efforts to increase the availability of homeowners insurance through changes to the Florida’s Hurricane Catastrophe (Cat) Fund.
The Cat Fund was created after Hurricane Andrew to ensure that Florida’s insurance companies could quickly pay homeowners claims after a major hurricane and continue to provide coverage.
“Strengthening the Cat Fund is about preparing for hurricanes and funding the inevitable losses at the lowest possible cost. This legislation is good public policy for Florida’s insurance consumers and will help protect Florida’s economy from a meltdown if we are faced with another Andrew,” said Calabro, who published a letter from Gallagher about the legislation in Ideas in Action, a public forum used by TaxWatch to discuss vital issues affecting the economy and public policy.
The legislation, sponsored by Senator J.D. Alexander and Representative Kim Berfield, would strengthen the Cat Fund by increasing its capacity from $11 billion to $15 billion.
The legislation funds the extra capacity by including unregulated surplus lines policies, which are primarily purchased by owners of large homes along the coast, in the assessment base. It also increases the limits on assessments from 4 to 6 percent, which are triggered only when a catastrophic storm hits and money is needed to pay claims that exceed the fund’s capacity.
“Florida’s Hurricane Catastrophe Fund is critical to having a stable and viable property insurance market in our state,” said Gallagher, who oversees the state’s Department of Financial Services. “The dilemma is that the Cat Fund has not kept up with Florida’s rate of growth nor with inflation. If this fund is going to continue to provide protection for Florida’s homeowners and our economy, we need to allow it to catch up with Florida’s growing population.”
“Homeowners are becoming increasingly frustrated by the lack of available and affordable coverage and are looking to policymakers for solutions,” commented Sen. Alexander. “Strengthening the Cat Fund will encourage the private market to write more coverage and reduce the state’s role in providing insurance.”
“Without the Cat Fund, there would be no homeowners insurance market in Florida,” said Rep. Berfield, who chairs the House Insurance Committee. “Those who live here and move here deserve access to a viable and competitive insurance market. Making needed changes to the CAT Fund gives them a fighting chance.”
The Cat Fund currently provides $11 billion of capacity, or reinsurance, to the insurance industry. Access to private reinsurance, which is insurance for insurance companies, has been limited in recent years. As a result, many insurance companies in Florida have reportedly been reluctant to write coverage or have reduced their exposure by non-renewing policies.
Gallagher said the lack of reinsurance available through the private market, coupled with the inability of the Cat Fund to grow with the market, has resulted in a number of consumers being forced into the Citizens Property Insurance Corporation, the state’s insurer of last resort for homeowners who can’t get coverage from the private market.
“Florida is now home to nearly 16 million people, and we hearing from homeowners daily who are frustrated with the lack of availability and the cost of insurance,” said Gallagher. “Expanding the Cat Fund will promote needed competition in the marketplace by encouraging insurance companies to write more coverage for homeowners.”
Florida TaxWatch is a non-partisan, non-profit government watchdog and taxpayers’ research foundation supported entirely by voluntary tax-deductible membership contribution.
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