Florida’s Citizens Property Insurance Board of Governors has adopted its 2012 legislative priorities, which include supporting legislation that would reduce the size of Citizens, but opposing legislation that essentially does the same for the Florida Hurricane Catastrophe Fund.
The Cat Fund’s advisory council reported the state-run reinsurer faces a potential shortfall of more than $3 billion next year should Florida be plagued by an active hurricane season. House Bill 833, by state Rep. Bill Hager (R-Boca Raton), contains several reforms proposed by the Cat Fund’s chief operating officer, Jack Nicholson – including reducing the fund’s mandatory layer from $17 billion to $12 billion over three years and increasing the co-payments made by the state’s insurance companies, including Citizens, to reduce its overall exposure and shore-up its finances.
The following statement from Christian Cámara, director of the Florida office of The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below.
“The Citizens Board should be commended for recent efforts and its vote today toward developing and supporting ways to depopulate Citizens to eventually reduce the likelihood or severity of a taxpayer bailout. However, just as Citizens should be reduced for the benefit of the state’s taxpayers, so should the Cat Fund.
“As the primary source of reinsurance for Citizens and many of the state’s private insurance companies, the Cat Fund needs to be in the financial position to meet its obligations after an active hurricane season. Citizens’ own estimates on its ability to pay its claims relies on the Cat Fund’s ability to pay all – not most – of what it is committed to. Unfortunately, because the Cat Fund is too large and over-exposed, it faces the very real possibility of going broke without the ability to raise enough capital to pay all of its claims after a large hurricane or series of storms. Rep. Hager’s bill to reduce the Cat Fund is a gradual, sensible approach to get the fund back to a position of financial strength so it can meet its obligations to Florida residents and the state’s property insurance companies, including Citizens.”
Center on Finance, Insurance, and Real Estate
The Heartland Institute
The Heartland Institute is a 27-year-old national nonprofit organization with offices in Chicago, Illinois; Washington, DC; Austin, Texas; Tallahassee, Florida; and Columbus, Ohio. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.