Insurance

Workers Compensation Drug Repackaging | Automobile Insurance | Hurricane Taxes | Long-Term Care Insurance
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Hurricane Taxes

AIF SUPPORTS legislation to return Citizens to an insurer of last resort. AIF also SUPPORTS restoring the Florida Hurricane Catastrophe Fund (Cat Fund) to a safety buffer for Andrew-sized storms.

Reducing the exposure of Citizens and the Cat Fund will substantially reduce the likelihood of claims-paying deficits and, thus, hurricane taxes on insurance premiums for Florida’s employers. Created as an insurer of last resort, Citizens is now the largest homeowners insurer in Florida with 1.4 million policyholders. Its growth is attributed to low rates by legislative fiat and its authority to sell insurance to homeowners even though the homeowner is offered coverage by private insurers. Citizens has become the insurer of first resort and will continue to grow and drive private insurers out of the state as long as it has artificially low premiums. Private insurers cannot compete with a subsidized and financially unsound government-run insurance company. Citizens relies primarily on its ability to levy taxes on its policyholders and on every other Floridian’s insurance policies to pay claims resulting from hurricanes. Citizens also relies on the Cat Fund, the state-run reinsurer, for $6.4 billion of coverage.

The Cat Fund collects premiums which are not enough to cover its liabilities in the event of a hurricane. To pay claims, the Fund relies mostly on the levy of taxes on most insurance policies to pay back amounts borrowed by selling bonds. Anything needed above that to pay claims would have to be raised by the sale of bonds. Unfair as this assessment mechanism is, the Cat Fund and its advisers recently informed the Cabinet that the bond market cannot finance the Cat Fund’s full exposure, creating a shortfall of $3.2 billion or more.  The Cat Fund’s leadership has estimated that even slight under-performance could expose millions of policyholders to the risk of insolvency of their carrier. AIF supports legislation to right-size the Cat Fund, thereby ensuring that the Cat Fund can meet its obligations in the event of a storm and reducing the hurricane taxes that fund its operations, as well as its possible deficits.