A plan slammed as "insane" by one lawmaker -- which could raise insurance bills for Florida homeowners by having a state storm fund buy $1.5 billion of private reinsurance -- did not reach the Florida Cabinet on Tuesday and may be running out of time before hurricane season.Florida Hurricane Catastrophe Fund chief operating officer Jack Nicholson stopped short of saying the proposal is dead, but noted it may be too late to arrange the coverage in time for hurricane season June 1.
Also uncertain, say Tallahassee watchers, is the fate of bills in the legislature to shrink the Cat Fund. In an election year, anything that could be perceived as raising consumer rates could face tough sledding, either before the Cabinet or in the legislature.
Some bills would create more business for offshore reinsurers by shrinking the Cat Fund from $17 billion to $14 billion. One competing plan would make the state fund kick in faster than it does now after storms and its supporters say it could lower consumer bills by replacing more expensive private reinsurance.
The state fund acts as low-cost reinsurance that insurance companies buy to help them pay claims after storms. As The Palm Beach Post reported from an industry conference in January, Nicholson said the $1.5 billion deal required approval of Cabinet members and would raise consumer bills slightly -- he figured less than 1 percent -- but could help lower the risk of assessments to state insurance customers if the fund had to be bailed out after a big catastrophe.
Rep. Frank Artiles, R-Miami and a public adjuster, called it a boondoggle for Bermuda reinsurers and "insane." Countered David Hart, executive vice president of the Florida Chamber of Commerce, which backs the move: "He won't feel that way if Florida gets hit by a hurricane."
Opponents say unlike private reinsurance, the state fund builds up a pot of money that stays in Florida and grows each year there is no major storm. If private reinsurance is not needed -- and there's often a 3 percent or lower chance it will be in any given year -- the premiums stay in the pockets of reinsurers.
"Thanks to the past eight years without a hurricane, the annual funds paid into the Cat Fund by Florida insurance carriers now adds up to about $11 billion," said Jay Neal, CEO of the Florida Association for Insurance Reform, a Fort Lauderdale-based advocacy group that includes industry and consumer representatives. "That surplus would not exist if Nicholson and crew previously had been permitted to shift money out of the CAT Fund and into the coffers of reinsurers."