Senator Ring: Florida Insurers, Not Taxpayers, Should Bear More Risk

Warning that the legislation crafted during the 2007 property insurance special legislative session is tantamount to a hidden tax increase, Senator Jeremy Ring issued the press release below on September 9, 2008, urging that, failing the creation of a national catastrophe fund, a larger financial burden should be shifted back to Florida’s insurance industry.

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Senator Jeremy Ring Warns Floridians Could Face Largest Tax Increase in State’s History

Margate Democrat urges hurricane preparation include shifting larger financial risk to insurers

With Hurricane Ike a near miss and only halfway through the hurricane season, State Senator Jeremy Ring (D-Margate) on Tuesday warned that under legislation crafted during last year’s property insurance special session, Florida’s taxpayers could face the largest tax increase ever should a major storm strike the state. And he urged that failing the creation of a national catastrophe fund, a larger financial burden be shifted back to the insurance industry.

“The challenge to Floridians is that the insurance crisis is larger than simply the state of Florida. The only true fix is a federally created national catastrophic insurance fund,” Ring said. “I’ve always been steadfast that the back-end risk would be the most difficult economic burden from which to recover.”

At issue is the so-called “super CAT fund” created by the Legislature during the January 2007 special session on property insurance. The fund expanded the Florida Hurricane Catastrophe Fund and was intended to lower property owners’ insurance rates by offering insurance companies lower cost reinsurance and the guarantee of the state’s financial resources should a storm of unprecedented magnitude strike the Sunshine State.

Although the principle was a good one, the Margate Democrat warned that a hidden, potentially financially devastating downside remains in the fine print. Namely that the state would be forced to “shoulder the risk traditionally born to private industry, resulting in the Florida taxpayer paying the cost of the storm, rather than the insurer.”

According to Ring, recovery costs could top $100 billion for a hurricane as damaging as Katrina and “the debt could be so high, that all policies (fire, auto, home etc.) would be assessed increases annually for up to 30 years.”

Paying for that kind of bill could mean “an increase in sales taxes, as well as bonds being purchased at very unfavorable terms costing the taxpayers potentially tens of billions of dollars. This could result in the largest tax increase in the state’s history.”

To avert that risk and better protect the state’s residents, Ring urged a reduction in the state’s CAT fund exposure, along with its exposure risk inherent in Citizens Property Insurance Corporation — the state-run insurer of last resort.

“We all hope no major hurricane hits Florida,” Ring concluded. “However, we must be prepared for a day in which it just might. Preparation includes ensuring less financial risk to Florida’s citizens and transferring that risk to private industry where it belongs.”

 

 

 

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