Florida Cat Fund Tax Plan Raises Questions

A Florida plan to sell insurers and financial institutions state premium tax credits to help fund the state’s homeowners’ reinsurance facility is raising concerns among some officials.

The Florida Insurance Tax Pre-Payment Program was a late addition to the state’s budget. Sponsored by Senator J.D. Alexander (R-Lake Wales), the plan is designed to help shore-up the resources of the Florida Hurricane Catastrophe Fund. “Right now we’re short $3 billion in being able to meet the statutory commitments in the cat fund,” said Alexander. “So this is another way to try and piece together enough cash to make it through the coming hurricane season.”

The plan, however, is coming under scrutiny from cat fund officials. “Anytime you pass something like this it needs a lot of study,” said Cat Fund Executive Director Jack Nicholson.

The plan envisions insurers and financial institutions purchasing tax credits whereby they would receive a discount on the dollar for paying their state premium taxes early. The plan calls for insurers and banks to receive up to $1.5 billion in tax credits over 10 years. That money would then be lent to the cat fund, which would have to pay it back to the state.

It would mark the first time the cat fund has ever borrowed money from the state’s general revenue fund. That means if the cat fund is unable to pay its debt due to overwhelming hurricane losses it could have an impact on the state’s credit rating. “For a lot of people that is a game changer,” said Nicholson, who said thereare also questions such as how much money would be raised, its costs and which investor groups are in line to be paid first.

Fund officials are in contact with Gov. Rick Scott, who does have the authority to veto it.