As Hurricane Season Looms, Act Now to Reduce Costs

 

Florida’s State Board of Administration – the governor, the chief financial officer, and the attorney general –will have the chance to take proactive steps in reducing the cost of hurricane taxes for all Floridians before the start of 2014 hurricane season.

Global investors learned during the recent recession that they should invest a small percentage of their assets in opportunities which do not relate to the economy. By exploring global capital and reinsurance markets to determine if Florida can economically move some of its hurricane risk out of the state and into global financial markets, the SBA will have the chance to both lower the state of Florida’s risk of hurricane taxes and the ability of the Florida Hurricane Catastrophe Fund (Cat Fund) to pay its claims in a timely manner.

The Cat Fund has an obligation to provide up to $17 billion of coverage to Florida’s homeowners insurance companies. In the case that the Fund does not have enough the ability to pay these claims on its own, it will attempt to obtain the rest from the bond market even though financial advisors have indicated that it will not have the bonding capacity to make up the difference.

Bonds issued by the Cat Fund are paid back over 30 years through premiums, or hurricane taxes, on almost all property and casualty policies. Automobile policyholders, all businesses, charities, religious institutions, local governments and school boards are paying hurricane taxes yet none are benefiting from the Fund that goes to strictly reinsuring homeowners’ claims.

By moving hurricane risk out of Florida, the amount of hurricane taxes assessed on citizens, businesses and school boards will be reduced and the Cat Fund will be better prepared to pay its claims in a timely manner.

 

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Florida Homeowners Still Face Threat of Federal Flood Insurance Hike

Flood insurance rates increases, as a result of a 2012 law, poses a big concern for many people in the state, especially those in southwest Florida. While only a small percentage of people in the Jacksonville area will be affected by the rate increase, some Floridians who chose to buy property along the coast could see their rates increase as much as tenfold.

“The idea was to make sure people who built in flood prone areas pay their fair share of the premium for the flood insurance that they needed,” said David Miller, CEO and founder of Brightway Insurance.

As a result of this, many homeowners are unable to afford their flood insurance premiums.

Congress is working on providing relief to homeowners. The Senate passed a bill that would delay the rate increases for four years while the House worked on presenting a modified version of the bill that would have been voted on last week but has been pushed back.

There’s a state effort for a revised flood insurance bill designed to cut premiums but it has yet to be brought before Florida lawmakers for a vote.

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