Bill to shrink hurricane fund would make homeowners pay more

Article Courtesy of The Palm Beach Post

By Charles Elmore

Published February 28, 2013

Home insurance premiums would rise statewide under bills filed Wednesday that aim to shrink the Florida Hurricane Catastrophe Fund.

The state’s Cat Fund, a major source of money to pay claims after severe disasters, would contract from $17 billion to $14 billion over three years under HB 11o7, filed by state Rep. Bill Hager, R-Boca Raton. A similar Senate bill, 1262, was filed by Sen. Alan Hays, R-Umatilla.

That move is likely to create business for private reinsurers, typically offshore and foreign companies whose unregulated rates often run more than double what the Cat Fund costs.

Industry groups say it’s a good way to reduce the state’s role in the property insurance market, but acknowledge it would likely raise homeowners’ bills. How much? One estimate puts it at 3.6 percent, said former legislator Don Brown, a consultant to the Florida Insurance Council and Associated Industries of Florida.

One Senate insurance reform package has dropped a Cat Fund cutback — at least for now — out of concern it would raise the cost of living for residents.

Still, Brown gave the measure an even shot to pass this spring’s legislative session.

“I would say 50-50,” said Brown, speaking to The Palm Beach Post’s editorial board Wednesday. A smaller Cat Fund means less difficulty finding financing after catastrophes, he said: “It would reduce the likelihood of claims not getting paid.”

Skeptics said they have trouble seeing why the move is necessary or good for consumers, since it drives up the costs of ratepayers statewide.

“I wouldn’t have a tolerance for legislation that puts a larger burden on policyholders,” said Rep. Mark Pafford of West Palm Beach, policy chair for the Democratic caucus.

Among other legislative initiatives, the Florida Insurance Council backs a range of efforts to shrink state-run insurer Citizens, such as reducing coverage for vacation homes or structures owned by people living outside Florida, said Sam Miller, the council’s executive vice president.

On car insurance rerforms, more time will be needed to assess how Personal Injury Protection changes will affect rates, said Lynne McChristian, Florida representative for the Insurance Information Institute. Out of 136 approved filings, only about one in four — 36 — reached a targeted 10 percent decrease or more under a law whose major provisions took effect Jan. 1, according to a summary provided by industry officials. Another 32 saw smaller decreases in PIP, 25 had no change, and 38 raised PIP rates.