Florida residents could soon be faced with increased surcharges on their home, auto and other insurance policies because the state’s catastrophe fund needs more money to pay claims from past hurricanes.
The Florida Hurricane Catastrophe Fund pays claims when insurers can’t. When it doesn’t have enough money, assessments are tacked on to car, boat, motorcycle and homeowners premiums. Businesses are also assessed extra on their premiums.
Florida residents are already paying a 1 percent surcharge because the fund was short on what was needed for claims in the 2005 hurricane season that caused billions of dollars of damage.
Fund officials say they still have a shortfall. They want to either extend the current surcharge, which had been set to end in 2012, or sell bonds and increase assessments to pay off the bondholders.
Fund officials say they need about $600 million more.
Gov. Charlie Crist, Attorney General Bill McCollum and Chief Financial Officer Alex Sink will decide how to deal with the shortfall later this month.
Florida insurance customers also can be assessed with surcharges to pay for other problems, too. If state-backed Citizens Property Insurance Corp. doesn’t have enough to pay claims, insurance customers bail it out.
And if an insurance company goes out of business, policyholders must help out there too. For example, Florida recently assessed insurance customers surcharges to cover unpaid claims from Poe Financial Group, a Tampa insurer that failed.
Meanwhile, a new report from credit rating agency A.M. Best Co. points to another potential problem for insurers and state-backed reinsurance plans: the nationwide credit crunch may make it difficult to find people willing to buy bonds that would help pay off claims after a storm.
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