Legislators moved another step closer to reducing the size of the state fund that backs up private insurers while trying to make its name less menacing.
On Thursday, the House Banking and Insurance Subcommittee backed HB 1107, a measure that would reduce the Florida Hurricane Catastrophe Fund from $17 billion to $14 billion over three years. The bill would also change its name to something expected to be more palatable to bond underwriters: the less ominous but more bureaucratic State Board of Administration Finance Corp.
Rep. Bill Hager, R-Boca Raton, the sponsor of the bill, said many international bond underwriters looking at the fund which provides state-backed reinsurance for property insurers to help maintain lower-cost coverage for policyholders might get nervous when they see the words hurricane catastrophe.
Hager said the fund -- usually called the CAT fund for short -- and the other state-backed property insurance entity, Citizens Property Insurance, which is the states largest property insurer, have gotten out of control. He predicted lawmakers will work for several years to undo policies that have allowed them to get so large.
Are we going to have to come back and continue to tune these monsters weve created? You bet, Hager said.
All insurance companies that write property coverage in Florida must participate in the CAT fund, and the bill reduces the maximum amount of the mandatory coverage, while also increasing the co-pays for insurers. The coverage the CAT fund sells to insurers is far less expensive than private reinsurance, helping to keep the cost of property insurance lower in Florida than it otherwise might be.
The current limits of mandatory coverage -- the most the CAT fund would be on the hook for if private insurers cant pay -- is $17 billion, and would shrink each year until getting down to $14 billion in 2016, under the bill. The fund currently has about $8.5 billion in cash.
The proposal still has to clear the Government Operations Appropriations Subcommittee and the Regulatory Affairs Committee before reaching the full House.
The Senate version (SB 1262) has remained stagnant before the Banking and Insurance Committee as conflicting directions have been proposed for the fund.
Sen. Alan Hays, R-Umatilla, has proposed a bill similar to Hagers that would reduce the amount of bonding and emergency assessments charged to Florida residents in the event of a shortfall by insurers in the wake of a major hurricane.
Opponents of the proposal say the bill would increase existing premiums by reducing the insurance for insurers.
Sen. Jeremy Ring, D-Margate, has headed an effort to reduce premiums by expanding the bonding requirements from one to three years, a move backers say could generate $6 billion a year without giving much more of the market to private reinsurers.
The measure to reduce the fund as proposed by Hager and Hays is supported by business advocates and environmental groups that support reducing coastal construction.
