Fla. TaxWatch issues hurricane cost study
A recent study released by Florida TaxWatch, though not officially backed by its board of trustees, attempts to clarify that cost.
In the event of a major hurricane – one slated to occur once every hundred years – TaxWatch says that “$18 billion dollars would have to be borrowed in the open market (if possible) to pay the claims, … (and) nearly all of Florida’s policyholders would be assessed for decades to repay the debt.”
TaxWatch says that Citizen’s policyholders would take a major hit following a big storm: The average homeowner assessment would be $9,400, with $1,200 due the first year and the rest paid off over 30 years. Businesses and condo associations would also pay. If current premiums run $150,000 to Citizens and $50,000 in other premiums, a post-hurricane assessment could be nearly $600,000, with $80,000 of that due in the first year.
While study authors say their primary goal was to explain the problem simply, it concludes with seven recommendations for fixing the problem:
1. Educate taxpayers and policyholders. “We must learn that, at the root, we do not have an insurance problem; we have a hurricane problem,” the study says.
2. Return Citizens to an insurer of last resort.
3. Fund and/or shrink the CAT Fund. Florida’s CAT Fund is a backup insurer for insurers. However, it doesn’t make enough money. TaxWatch first advices a tax increase to boost the CAT Fund; if that’s unworkable, it recommends shrinking the fund.
4. Make Florida more insurer-friendly. TaxWatch suggests that the state stop regulating rates and allow them to “float to their natural, market-driven level as quickly as is politically possible.”
5. Require private insurers to be adequately capitalized. This step minimizes the risk of company failure following a major storm.
6. Strengthen building codes – and enforce them.
7. National reinsurance backstop? TaxWatch likes the idea of a national disaster insurance policy, but notes that “Florida has more catastrophe exposure than all of the other (eastern) coastal states … combined. If we can get the rest of the states to pick up our tab, I am all for it. But in this economy, that appears doubtful.”
The full report can be downloaded on the Florida TaxWatch website.
© 2011 Florida Realtors®