Published in the Tallahassee Democrat and the Pensacola News Journal:
Recent hurricane and tropical storm activity in the Gulf of Mexico and the Atlantic Ocean remind us of one thing — Florida is Ground Zero for tropical weather activity.
In June, parts of Florida’s Gulf Coast became inundated with rain, causing flash flooding, tornado spin-offs and heavy wind as Tropical Storm Colin made landfall in Florida’s Big Bend area. While Colin never became a hurricane, the tropical storm caused plenty of damage and disruption and it exemplifies what could be in store on a much grander scale. Now, the threat of hurricanes and tropical storms loom in the Atlantic, both with some potential to become hurricanes.
Advocates for smart financial planning have been shouting for years that Florida can’t become relaxed when it comes to hurricanes. And that’s a tough argument to make given that Floridians haven’t experienced a hurricane since 2005, and others may not have moved to the state until the last decade.
The good news is Florida leaders remember the names Charley, Frances, Ivan, Jeanne, Rita, Wilma, Dennis, Katrina and others from just over a decade ago. The death, destruction and financial ruin led to a recognition that smart policy decisions, protective of the state, need to be continuously implemented.
Citizens Property Insurance Corporation (Citizens) is the state-run “insurer of last resort.” It has been lowering its policy count through a depopulation processes, but it still is the largest homeowner insurer in Florida. A large portion of its policies cover houses and businesses that other companies won’t insure – mostly because they are high-dollar properties in coastal and flood areas. A reduction in the number policies by Citizens should continue to push these risks to private insurers in the state. Reducing risk is a good thing for homeowners.
Another good thing is that state leaders, for the second straight year, have purchased additional reinsurance to protect the Florida Hurricane Catastrophe Fund (Cat Fund) and from a costly event. The Cat Fund is a backup insurance entity that all Florida homeowner’s insurance companies pay into and get paid from to be reimbursed for losses following a storm. It is a tool to stabilize the insurance market after years of tumult. With global reinsurance rates lower than they have been in years, it is a good investment and one that should continue, as Florida will not become less hurricane-prone.
Both the Cat Fund and Citizens have the power to levy hurricane tax assessments on all Florida insurance policy holders after a storm, but reinsurance circumvents these costly assessments. To mitigate the risk of hurricane assessments, leaders must ensure that policies are enacted that move the risk away from the state to private insurers. Reinsurance does that and it’s a good thing for taxpayers.
Floridians must prepare their homes and businesses for hurricanes to limit potential damage. While more work is still needed, consumers and taxpayers should rest assured that the state is in better financial shape at this point due to key policy decisions that are pushing hurricane risks from the public into private insurers’ hands.