Tallahassee Democrat: TaxWatch: Florida one hurricane away from financial ruin

This article appeared in the Tallahassee Democrat on April 5, 2010:

By Jim Ash
FLORIDA CAPITAL BUREAU

Florida is one major hurricane from financial ruin, insurance companies need more freedom to raise rates, and lawmakers need to rein in Citizen’s Property Insurance, the state-run behemoth that has become the largest property insurer in the state.

Those are the conclusions of a report released Monday by TaxWatch. The government watchdog and several lawmakers held a Capitol press conference to send a not-so-subtle message to Gov. Charlie Crist, who has threatened to veto property-insurance legislation.

Citizens has about $4.2 billion cash on hand and another $8.7 billion available in reinsurance.

But that $12.9 billion is short of the $21 billion in payouts it would face if a 1-in-100 year storm hit this year, critics warn. The state’s Hurricane Catastrophe Fund, which backs up insurance companies after major disasters, has a $7.2 billion deficit and would have to go to Wall Street to borrow $10 billion if a mega-storm hit, according to the report.

“If one hurricane hits in 2010, we face the real possibility that Florida’s citizens won’t get their claims paid,” said Rep. Dave Murzin, a Pensacola Republican who chairs the Economic Development and Community Affairs Policy Council. “No state has ever gone to the bond market to borrow that kind of money.”

TaxWatch President Dominic Calabro said efforts to grow Citizens and keep rates low may be politically popular, but it risks economic disaster.

“We’re trying to remove the fairy dust,” Calabro said.

Murzin and fellow Republican Bill Proctor of St. Augustine are sponsoring legislation that would, among other things, allow private insurance companies to charge higher rates without regulatory review, with a cap on average annual increases.

The report calls for Citizens to return to its roots of being the insurer of last resort and to have higher, more “actuarially sound,” rates and to notify customers every year of how much the rates would have to increase in the event of a major hurricane.

The report also suggests prohibiting Citizens from writing new policies in high-risk coastal areas and setting up more aggressive programs to encourage Floridians to strengthen their homes.

Proctor and Sen. Mike Bennett, R-Bradenton, sponsored similar legislation last year, but it was shot down by Crist.

Crist recently appeared at a Senate committee to urge that the legislation not pass. It passed by a narrow margin.

“The governor is still opposed,” said his spokesman, Sterling Ivey.

Find this article at: http://floridacapitalnews.com/article/20100405/CAPITOLNEWS06/100405009