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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