Florida Chief Financial Officer Alex Sink presented a proposal that would give the state the ability to set both the reinsurance levels and pricing of the Cat Fund’s optional coverages, giving greater flexibility and accountability to the management of Florida’s reinsurance fund.
Holding up a stack of property, auto and other insurance bills full of assessments Tuesday, Sink unveiled her proposal to reform the Cat Fund which could reduce the potential for future Cat Fund assessments on Florida’s insurance consumers.
Acceptance of the proposal would also promote increased competition in the private insurance market, according to Sink.
Sink is preparing legislation and will urge legislative leaders to implement the proposal during the upcoming special session. Additionally, Sink announced that she will present her proposal at the Florida Cabinet meeting on Oct. 16.
If approved by the Legislature before the end of the month, the reformed Cat Fund will begin evaluating financial and insurance market conditions and will recommend to the Governor and Cabinet the level and pricing of Cat Fund optional coverages for the 2008 Hurricane Season.
Reinsurers reacted favorably to Sink’s proposal, immediately issuing an endorsement.
Franklin W. Nutter, president of the Reinsurance Association of America said, “We believe CFO Sink’s proposal makes a great deal of sense. The private reinsurance market has both the capacity and the appetite to accept Florida’s catastrophe risk and is able to spread that risk around the world, rather than concentrating the risk in Florida as is currently the case.”
In his reaction Nutter added, “The private reinsurance market can do that without the huge post-hurricane assessment/taxes inherent in the current law. We will cooperate fully with CFO Sink as she moves forward with her excellent proposal.”
While Sink’s proposal will change the operation of Florida’s Cat Fund, the structure and mandatory coverages created by the Legislature will not change.
In Jan., the Florida Legislature created and provided for the pricing of an additional $12 billion in optional reinsurance coverage available through Florida’s CAT Fund in an effort to achieve rate relief for Florida’s insurance consumers. The expected rate relief not being realized and Floridians have taken on substantially more risk for future assessments from the CAT Fund, Sink said.
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