Property insurance rates could inch up faster under two proposals that were discussed this week in the Florida Legislature.
The proposals, HB 1107 and SB 1262, would shrink the state’s Florida Hurricane Catastrophe
Fund, a tax-exempt fund that provides low-cost backup insurance for property
Shrinking the $17 billion “Cat Fund” to $14 billion over
three years would likely increase insurance premium by an average of nearly 7
percent over that period, according to initial estimates by the Insurance
Consumer Advocate. That would come on top of other annual rate increases that
are often in the double digits.
Supporters of shrinking the Cat Fund say it’s a fiscally
prudent move, since the fund would have to borrow money after a massive
hurricane and doing so might be difficult under certain circumstances. That
could lead to financial turmoil for the state, with many insurance companies
going belly up. Such a scenario is very unlikely, since the bond markets could
provide billions of dollars to cover a disaster but proponents are using it to
push the urgency of the perennial Cat Fund bill.
“Without a firm foundation, no industry will be able to
stand and without proper financial background, and the Cat Fund will not be
able to pay the claims,” Sen. Alan Hays, R-Umatilla, who is backing the
bill, said Thursday.
The committee took the Cat Fund provision out of a larger,
comprehensive insurance bill last month, because of fear over the “rate shock”
it could cause. But Hays resisted and filed his own bill to shrink the Cat
Fund. A similar bill, sponsored by Rep. Bill Hager, R-Boca Raton, was
workshopped in the House on Wednesday.
“The reality is that Florida
is one storm away from major fiscal devastation,” Hager said in a statement.
“I’m pleased that we were able to begin the dialogue today in the Florida House
and look forward to this bill being heard by all of my fellow legislators.”