A move to firm up the states ability to respond to a hurricane on the eve of the storm season could mean a slight uptick in the average property insurance premium.
The Florida Hurricane Catastrophe Fund advisory council on Thursday recommended that at least $1.7 billion be added to the potential reserves, while researching market conditions to determine if more could be acquired.
The fund currently has about $8.6 billion considered on-hand to help Floridians after a storm, and can pursue through bonds to increase that to $17.3 billion following a disaster.
On Thursday the advisory council recommended the state be allowed to limit the amount that could be sought after a storm to $7 billion.
The other $1.7 billion would require about a 0.5 percent average increase to premiums. The amount would vary depending upon the company.
The recommendations must still be approved by Ash Williams and the fund trustees at the State Board of Administration. Jack Nicholson, executive director of the fund, said the objective is to give the fund more of a cushion for when the state is again hit by a storm.
Any pre-event that we can put in our pocket is going to benefit us either in the initial season or on a subsequent-season basis, Nicholson said. Were well short of where we need to be in our subsequent seasons.
Since the damaging and expensive 2004 and 2005 hurricane seasons, Florida has been beefing up the fund in anticipation of insurance companies' need to dip into the well following the inevitable major storm or repeated series of hits. There has been no major storm since 2005.
According to numbers from the Insurance Information Institute, the fund currently could handle any one of the four 2004 storms on its own, even with the damage values adjusted for 2009: Charley, $8.6 billion; Ivan, $5 billion; Frances, $5 billion; and Jeanne, $3.5 billion.
Hurricane Wilma in 2005 caused $9.4 billion in damage, with the number adjusted to 2009. Two other storms in 2005, Dennis and Katrina, each caused less than $1 billion in damage in Florida.
Lisa Miller, CEO of the Tallahassee consulting firm Lisa Miller & Associates, called the recommendation a reasonable anaylsis to let the staff negotiate and research the rates.
I think the concept of giving the CAT Fund team the ability to see what the market will bear on pre-events is a good signal, Miller said.
John Forney of Raymond James noted in a presentation on claims-paying capacity estimates that Florida shouldnt have trouble finding investors for municipal bonds after a hurricane, noting that California, amid its own self-inflicted economic distress in 2009, was able to secure $23.18 billion
This shows the money is out there, Forney said.
Legislators tried to reduce the fund by selling $1.5 billion in tax credits over a 10-year period to insurance companies, in a move by Senate Budget Committee Chairman Sen. J.D. Alexander, R-Lake Wales, at the end of the 2012 regular session.
But the Insurance Tax Pre-Payment Program bill was vetoed by Gov. Rick Scott. Scott, in a statement with the veto, said the bill hadnt been fully vetted through the legislative committee process.
Reach Jim Turner at jturner@sunshinestatenews.com or at (772) 215-9889.
