Although the waters have been seemingly quiet this hurricane season, National Hurricane Center data reminds us the Atlantic Ocean’s fourth named tropical storm usually doesn’t form until the end of August. With Andrea, Barry, Chantel and Dorian already named, it is possible this is the year Florida’s good luck runs out.
According to the final “preseason” forecast released by experts at Colorado State University, 2013 will be another above-average Atlantic basin hurricane season, suggesting a 64 percent chance for a Category 3-5 hurricane to strike the United States coastline this year – about 12 percent more than average.
As experts continue to monitor the waves off of Africa and disturbances that form in the Caribbean, with hurricane preparedness kits in hand, this is also the time for Floridians to realize the state’s vulnerability from a financial perspective.
During the 2013 legislative session, Florida’s elected leaders made forward progress to reform the state-run Citizens Property Insurance Corporation. Signed into law by Gov. Scott, Senate Bill 1770 reduces the maximum Citizens’ policy limit from $2 million to $1 million and further reduces this amount by $100,000 per year for three years to $700,000; establishes a clearinghouse program; and removes subsidies for new construction in environmentally sensitive coastal areas.
Earlier this year, the Florida Legislature balked at an opportunity to rectify the ongoing issues related to both Citizens and the Florida Hurricane Catastrophe Fund by failing to take advantage of much lower reinsurance prices. The bipartisan plan supported by consumer groups, the business community, taxpayer advocates and environmental groups would have transferred more risk to the private reinsurance market and saved consumers money.
A global safety net of sorts, private reinsurance is able and willing to accept Florida’s hurricane risk, which would better protect all Floridians from potential “hurricane tax” assessments that everyone will be required to pay when the next major storm or series of storms makes landfall.
Florida should undoubtedly be moving toward the creation of a sustainable property insurance market that is not dependent on bond debt and “hurricane tax” assessments that force 79 percent of Floridians to pay for those most at risk. The state should continue on the path of reducing the size of Citizens and the burden it imposes on all homeowners, and to ensure that wealthy individuals living on the coast cannot purchase insurance from the “insurer of last resort” at the expense of the majority of Florida consumers. More work needs to be done.
At a minimum, Citizens should not be providing subsidized rates to the wealthy and those with multiple residences, particularly if they live out of state or out of the country. Recent data that I received from Citizens confirms that nearly 180,000 Citizens policies go to consumers living in other states across the U.S. In addition, thousands more subsidized insurance policies are covering foreign property owners living overseas in Luxemburg, United Arab Emirates, Kyrgyzstan, China and Chile, as well as 86 other countries. Do 20,000 Canadians need Florida’s residents to subsidize their insurance policies? Considering that 90 percent of Canadians pay cash for their second home in Florida (National Association of Realtors, 2012), why are policymakers subsidizing the rich on the backs of everyone else?
That fact is only 31 percent of Citizens insurance bills are even sent to the address of the insured home. Florida’s policymakers might think they are helping coastal residents, but these subsidies are helping more wealthy folks who often live elsewhere. Because most of these policies are below water, these costs are pushed to ordinary Floridians, some of whom don’t even own a home.
I think most of Florida’s voters would agree, but these problems need to be dealt with before the next major storm. Depending on the severity of this storm season, we know from past experience that Floridians will be able to clean up the physical destruction following a coastal storm. The question is whether or not the state will survive the financial devastation that is imminent.
Steve Pociask is president of the American Consumer Institute Center for Citizen Research, an educational and research nonprofit organization. For more information, visithttp://www.theamericanconsumer.org.
Published on August 21, 2013 in the Sun Sentinel and available at http://www.sun-sentinel.com/news/opinion/fl-spcol-insurance-oped0821-20130821,0,7527420.story.