Sink-ing Feeling: Florida Still Searching for Fix for Hurricane Exposure

Florida lawmakers need to make some smart decisions on reducing the risk to Florida property owners from hurricanes, the state’s chief financial officer said.

In a letter to legislative leaders, CFO Alex Sink said property owners cannot afford shocks to their homeowners insurance rates like those that came after several hurricanes hit the state in 2004 and 2005.

She recommended the Legislature authorize the Cabinet to shop for reinsurance in the fall instead of the spring to take advantage of more favorable market conditions. She also asked lawmakers to continue a $20 million program that helps citizens with improvements that make their homes less susceptible to wind damage.

“It’s time to start making smart decisions and enacting solutions, so that Florida will be less financially exposed when a major storm hits,” Sink said. “We must establish a long-term, strategic vision for addressing hurricane risk.”

A satisfactory solution has been elusive for lawmakers and regulators alike the past four years.

A spokesman for Insurance Commissioner Kevin McCarty said he supports “viable solutions that will further his efforts during these difficult economic times.”

Sink said the $28 billion exposure to the Florida Hurricane Catastrophe Fund should be incrementally cut back and that the state-backed Citizens Insurance that insures more than one million homes at below-market rates should be an insurer of last resort.

“A glide path on Citizens’ rates to appropriate levels will help to bring national insurance companies back to the Florida market and begin the process of lowering premiums to consumers,” said Barney Bishop, president of Associated Industries of Florida. “We need desperately to reduce the ‘cat’ fund.”

“Florida’s hurricane risk represents one of the largest catastrophic risk exposures in the world,” Sink agreed.

State Farm, the state’s largest private property insurer, is shutting down its property business here because it could not guarantee the solvency of its Florida operation. The Illinois-based company and others have been at odds with regulators in recent years over requests for rate increases.

However, more than three dozen new companies have formed to pick up some of the slack.

The CFO’s recommendations came just days after the State Board of Administration, where she is one of three members, heard proposals on possible avenues for reducing the state’s exposure.

In a move that could create some political room, Gov. Charlie Crist said he’s not opposed to letting Citizens Insurance raise its rates, as long as they aren’t raised too much.

Citizens’ rates have been frozen for three years but are scheduled to increase in early 2010 unless state lawmakers intervene. The hurricane season begins June 1.