CFO Sink Outlines Suggestions For Reducing Florida’s Catastrophic Risk Exposure

In a letter dated today, March 12, 2009, Florida Chief Financial Officer (“CFO”) Alex Sink offered a four-step legislative plan to reduce the State’s catastrophic risk exposure.

The letter, which was sent to Florida House Insurance, Business and Financial Affairs Committee Chairman Pat Patterson and Senate Banking and Insurance Committee Chairman Garrett Richter is attached for your review.

A Florida Department of Financial Services press release Outlining the CFO’s plan is reprinted below.

Should you have any questions or comments, please contact Colodny Fass.

CFO Sink Urges Steps to Reduce Florida’s Hurricane Risk

CFO Sends Letter Outlining Four Responsible Suggestions

TALLAHASSEE- Citing the high level of catastrophic risk exposure Florida faces, Chief Financial Officer Alex Sink today laid out responsible guidelines she suggested the Legislature follow when working to reduce the state’s risk and protect homeowners. CFO Sink broke her strategic vision down into four smart and incremental steps in a letter sent today to Representative Pat Patterson, Chairman of the Insurance, Business and Financial Affairs Committee, and Senator Garrett Richter, Chairman of the Banking and Insurance Committee.

“There are responsible, gradual changes the Legislature can make that will begin reducing our hurricane risk exposure and will better protect Florida’s homeowners,” said CFO Sink. “It’s time to start making smart decisions and enacting solutions, so that Florida will be less financially exposed when a major storm hits.”

In her letter, CFO Sink advocated gradual steps, recognizing that Florida property owners cannot afford to bear large, one-time shocks to their homeowners insurance rates, similar to those experienced in 2006. The four suggestions CFO Sink made in today’s letter are as follows:

1. Reduce the risk of Property Damage with My Safe Florida Home – With the overwhelming success of the My Safe Florida Home Program, CFO Sink recommended that the hardening of homes be continued by rolling over the estimated $20 million remaining in the program.
2. Reduce Uncertainty of Bonding by Lowering Cat Fund Exposure – As she suggested in 2008, CFO Sink urged the Legislature to reduce the risk exposure of the Cat Fund by gradually phasing out the TICL layer over a series of years.
3. Establish Florida’s Reinsurance Program in the Fall, Not the Spring – CFO Sink proposed that the Legislature empower another entity with the ability to set coverage levels in the Cat Fund in the fall, taking advantage of the broader range of possible markets.
4. Gradually Return Citizens Back to Its Role as “Insurer of Last Resort” – With Florida’s homeowners subsidizing Citizens and their actuarially unsound rates, the CFO encourage the Legislature to seriously consider the recommendations of the Citizens Task Force.

“We must establish a long-term, strategic vision for addressing hurricane risk,” CFO Sink continued. “I hope to work with my colleagues on the Cabinet and members of the Legislature in a constructive and bipartisan way to make some of these changes in the coming months.”

The letter sent by CFO Sink is attached.

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