A year after the Florida Legislature and Governor Crist were duped by the insurance industry, legislation aimed at lowering the financial catastrophe of a major hurricane has been introduced to correct last year’s mistake. See HB 983. Last fall, I spoke with Alex Sink regarding her concern that the collapsing bond markets could make it difficult for Florida to quickly raise money to pay for Catastrophe Fund obligations in the event of a hurricane. Given the decrease in statewide tax revenues and the ever increasing credit strains caused in part by the sub-prime mortgage crisis, she has acted very prudently by supporting this legislation.
Obviously, if the state is picking up less of the insurance payments caused by a natural catastrophe, the insurance industry is picking up more. Rates have to go up. The question is: How much? The second question in an election year is: If they go up a lot, are voters going to retaliate at the polls this fall? Of course, the State has an “out”: Citizens Property Insurance Corporations. Citizens is a governmental entity “competing” against private insurers. If it continues to charge lower rates, many policyholders and voters will be spared the increase. Indeed, if the rates are limited to a 2 percent increase as reported in the Palm Beach Post, voter dissatisfaction probably won’t materialize. Nevertheless, the action by Sink and the Legislature was a step in the right direction. We were a Katrina away from a major financial catastrophe, and this is a prudent step in the right direction.