Florida lawmakers need to make some smart decisions on reducing the risk for Florida property owners from hurricane damage, the state’s chief financial officer said Thursday.
In a letter to key legislative leaders, CFO Alex Sink said property owners cannot afford shocks to their homeowners insurance rates like those that came after several hurricanes hit the state in 2004 and 2005.
She recommended the Legislature authorize the Cabinet to shop for reinsurance in the fall instead of the spring to take advantage of more favorable market conditions. She also asked lawmakers to continue a $20 million program as an incentive for citizens to make home improvements that make homes less susceptible to wind damage.
“It’s time to start making smart decisions and enacting solutions, so that Florida will be less financially exposed when a major storm hits,” Sink said. “We must establish a long-term, strategic vision for addressing hurricane risk.”
A satisfactory solution has been elusive for lawmakers and regulators alike the past four years.
A spokesman for Insurance Commissioner Kevin McCarty said he supports “viable solutions that will further his efforts during these difficult economic times.”
Sink said the $28 billion exposure to the Florida Hurricane Catastrophe Fund should be incrementally cut back and that the state-backed Citizens Insurance Corp. should be reduced to the role of insurer of last resort. Citizens presently has more than 1 million Floridians insured at below-market rates.
“A glide path on Citizens’ rates to appropriate levels will help to bring national insurance companies back to the Florida market and begin the process of lowering premiums to consumers,” said Barney Bishop, president of Associated Industries of Florida. “We need desperately to reduce the ‘cat’ fund.”
The CFO’s letter was sent to Rep. Pat Patterson, R-Deland, and Sen. Garrett Richter, R-Naples, who chair the insurance committees in their respective chambers.
“Florida’s hurricane risk represents one of the largest catastrophic risk exposures in the world,” Sink wrote.
State Farm, the largest private property insurer in Florida with roughly 1.2 million policies, announced earlier this year it was shutting down its property business here because it could not guarantee the solvency of its Florida operation. The Illinois-based company and others have been at odds with regulators in recent years over requests for premium increases.
More than three dozen new companies have formed to pick up some of the slack from the pending State Farm departure and Citizens’ reduction.
The CFO’s recommendations came just two days after the State Board of Administration, where she is one of three members, heard proposals from financial advisers and Insurance Commissioner Kevin McCarty on possible avenues for reducing the state’s exposure.
The six-month hurricane season begins June 1.
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