Blog

Ca⁠t⁠ Fund Fever

By: The James Madison Institute / November 9, 2011

The James Madison Institute

Blog

November 9, 2011

By Dr. J. Robert McClure, JMI President & CEO
In the event of a big storm, or series of lesser storms, the Florida Hurricane Catastrophe Fund currently faces a potential $3.2 billion shortfall. As we approach the start of the 2012 Legislative Session, it’s important that this remain top-of-mind for Florida’s elected leaders because of the financial impact the fund could potentially have on Floridians.Because it cannot meet its overexposed obligations, the catastrophe fund needs to be addressed immediately. Both Citizens Property Insurance Corp., which continues to write policies with actuarially unsound rates, and private insurers are mandated to buy from a fund that admits it is unable to meet of its financial obligations. This situation puts everyone, including businesses, homeowners, renters, churches, charities and automobile policyholders, at risk.While news reports have suggested insurance premium rate hikes could be impossible for some to afford, the costs associated with insolvent insurers, unpaid claims, and future “hurricane taxes” could total thousands of dollars per year per policy, for up to 30 years. Not only do Florida residents statewide currently subsidize Citizens policyholders living in multimillion beachfront homes, but the current structure of the fund is likely to tax these same individuals on their insurance policies the next time a storm or series of storms pummels the state.We would be wise to take the advice of Cat Fund COO Jack Nicholson and scale back the size of the Cat Fund. Doing so will help Florida continue along a “glide path” to stability, lessen the risk and exposure associated with the state-run insurance entities, help reinvigorate the private market, and, most importantly, better protect Floridians.