Editorial: Patching Florida’s catastrophe fund

Florida rolls the dice with citizens’ dollars every hurricane season. A sensible proposal by Boca Raton Republican Rep. Bill Hager would halt the reckless gambling.

It won’t be popular because it will end up raising insurance rates, but it will also make the treacherously overexposed Florida Hurricane Catastrophe Fund, the reinsurer of last resort, more responsible.

Taxpayers back up the fund, which keeps rates artificially low. But it also forces all citizens to subsidize homeowners who build in dangerous coastal areas. These homeowners are spared the full costs of their risky decisions.

Hager’s bill is built on the recommendations of Jack Nickolson, the chief operating officer of the fund. It would gradually reduce the Cat Fund’s size, from $17 billion in 2012-2013 to $12 billion in 2015-2016.

The Cat Fund now has only about $7 billion on hand, though it might raise another $7 billion or more from the bond market after a storm.

But a major hurricane — or series of hurricanes — would cost far more. The four hurricanes of 2004 — Charley, Ivan, Frances and Jeanne — cost more than $45 billion.

In the event it can’t fund its obligations, the Cat Fund can levy a tax on insurers that will be passed on to consumers. The state also would look for federal funds.

Hager’s bill would shift more of the risk to insurers and reduce the cap for the emergency special insurance tax that can be levied after an emergency.

Such moves, by reducing the public exposure, would increase homeowners’ bills, but modestly in most cases.

And a recent poll by the American Consumer Institute found 70 percent of the Floridians surveyed said they feared the expensive assessments that would occur should the Cat Fund not be able to meet its obligations. Some 55 percent of the 805 individuals interviewed said they would be willing to pay $15 more per month for coverage to make the fund sound.

Such polls, of course, may not accurately reflect how citizens will react when their insurance goes up. But should a major hurricane strike, citizens would be on the hook for much more.

Florida leaders for too long have tried to mask the true costs of the insurance marketplace.

Dominic Calabro of the nonpartisan Florida TaxWatch applauds Hager’s approach and his understanding that Florida must “alter the current state-run interrelated systems in order to reduce the probability, frequency and amount of potential ‘hurricane taxes’ on Florida taxpayers. Reform is necessary to ensure the Cat Fund can meet its obligations without crippling taxes.”

Lawmakers should have the courage to pass the measure.

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