Massachusetts officials, hoping to ease a homeowners insurance availability crisis on Cape Cod and other coastal areas, are studying Florida’s tax-exempt reinsurance fund for answers.
In 1993, after the devastation of Hurricane Andrew, lawmakers created the Florida Hurricane Catastrophe Fund (FHCF) during a special legislative session. Now, 10 years later, FHFC provides a stable market and relatively affordable reinsurance to all property insurers in the state.
“We are investigating how it works and whether it would work here,” Kevin Beagan, director of the State Rating Bureau within the Massachusetts Division of Insurance (DOI), told Insurance Journal.
He said the DOI is “really trying to move quickly” to identify possible longer term solutions to what it sees as a volatile private reinsurance market, while touting the FAIR Plan as the short-term answer for agents and homeowners facing insurance shortages in coastal cities and towns.
The Florida fund model might help stabilize pricing and availability of reinsurance for property insurers in the state, Beagan said, thereby opening markets to agents and consumers.
Starting a cat fund like Florida’s in Massachusetts would require legislation in part because it requires insurers to participate. It would also entail Internal Revenue Service approval to obtain tax-exempt status.
For more on the Massachusetts homeowners crisis including an interview with the FHCF senior administrator, see the March 22 issue of Insurance Journal, coming soon.