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Watchdog Group: Florida One Major Hurricane Away From Financial Collapse
April 6, 2010
Florida’s property insurance market is a major storm away from disaster and financial collapse, Florida TaxWatch warned Monday in a report on the state’s self-insurance picture.
With inadequate rates and risk concentrated among too few, the state-run Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund are ill-equipped to pay claims in the event of a major storm without seeking a federal bailout or strapping Floridians with billions in debt payments for decades to come.
A 100-year storm, for example, would outstrip capacity by $35 billion.
“Florida’s current homeowner’s insurance system is broken,” the Tallahassee-based group concluded. “One major hurricane has the potential to bankrupt private insurers, and the State’s self-insurance programs, devastating Florida’s already weakened economy.
“Florida TaxWatch independent analysis unequivocally shows that our current property and causality insurance system leaves the state and the taxpayers vulnerable to an economic disaster,: said Representative David Murzin (R-Pensacola), chair of the Economic Development & Community Affairs Policy Council at the event announcing the release of the report at the Florida Capitol on Monday.
“Should a major storm hit, Florida will be forced to borrow tens-of-billion of dollars – more money than any state has ever borrowed – and the interest payments alone will suck billions of dollars out of the state for decades to come. With hurricane season approaching and the legislative session coming to a close, we [the Legislature] must reduce the state’s potential crippling financial exposure through Citizens Property Insurance Corporation and the Florida Hurricane Catastrophe Fund by reforming the state’s insurance system,” Murzin added.
In 2009, both Citizens and the Florida Hurricane Catastrophe Fund faced enormous potential shortfalls, despite the absence of 2006-08 landfalling storms, because of artificially low premiums. Despite reserves built from a lack of major storm activity recently, there would be significant shortfalls to pay claims in 2010 if a major storm strikes Florida, according to TaxWatch.
Click here to read the entire report.
Comments
5 Responses to “Watchdog Group: Florida One Major Hurricane Away From Financial Collapse”
jake38,
The State of Florida has a contractual obligation to the members of Citizens, so they will HAVE to live up to it when the time comes. The problem is that so many people took the Citizen coverage becuase it was “cheaper” than other market rates and in effect transferred the risk of catastrophe from private companies to the state government. However, the state did this in reaction to all of its voters who were vehemently opposing the rate increases post-Ivan / Katrina.
I agree with Stuart. Home prices are too over inflated. More people are moving closer to the coastlines, and a lot are on fixed incomes. My only problem is, I would love to live in a $500,000 house on a fixed income. They cry because their insurance is high, and want the ones living away from the coast to pick up part of the expense. I say let them pay for some of mine. I have had minimal damage with the past hurricanes, but my insurance has nearly doubled. Where is the justice in that?
This country is still in the midst of an economic depression, the assumption that rebuilding will take place when the extreme hurricane(s) land upon Florida is far fetched. The money won’t be there, the incentive to rebuild won’t be there, and hopefully the people that choose to live in harms way will choose to live somewhere else.
You Who,
I respectfully disagree with the sentiment in your e-mail. There are several reasons for this story and many of them are valid. The property insurance issue is by far the biggest risk facing the State of Florida and people need to get their heads up and begin focusing on it.
The largest contributors to this problem are the following:
1) Home prices have appreciated exponentially in the last few years, so the cost of replacing a home is much higher. There are many houses in this area that were built at much less than $60,000 in the mid 70’s to early 80’s that would cost well over $100,000 to rebuild in today’s dollars.
2) The Federal Government’s policies during the economic crisis have not let home values fall as much as they probably should.
3) In most of the coastal areas of Florida, the largest insurer is the Citizens coverage referred to above because people are not willing to pay the premiums required by private insurers and the risks to the coastal homes aren’t offset by enough insured properties in areas like northescambia.
4) Most home insurance companies do not pool their Florida properties with properties from other states in such a way that they can reduce the premiums to FL homeowners.
These reasons are valid and the risk to the state is very real. Actually, this is the main reason I haven’t moved back into Florida at the present time.
I wonder how did they do it for all those past years. It seem now everything now is gloom & doom. We are all paying more for less and the insurance companies are making billions. My deductible is somewhere around 10 times higher then is was just 5 or 6 years ago and still all we here is these gloom & doom stories. What is this Country coming too “GREED”!!! If our Grand parents and our parents had to pay what we are having to pay this Country would have collapsed. You every wonder how did this Country every build them interstate highways and all them Military bases. Surely it was much cheaper back then but our taxes were a lot less too. Surely the Greed Factor was not a Factor at all back then. Every company or person want’s to make millions of dollars off one deal/job and it is killing this Country.