If a one-in-250-year storm were to hit Florida, policyholderassessments to support the state's hurricane catastrophe fund andits insurer of last resort could total $53 billion, a reinsurancebroker has warned.

Paul Kneuer, senior vice president and chief reinsurancestrategist for Holborn Corp. (a New York-based reinsurance broker,and one of the authors of a new white paper on the Florida propertyinsurance market), said the $53 billion figure represents theburden of such a storm on Florida homeowners--and, ultimately,perhaps on the federal government.

Mr. Kneuer said one key step in developing the assessmentestimate was to calculate the market share of the state's residualmarket insurer--Citizens Property Insurance Company.

He believes his report--"Florida 2007 Update: Law Changes andMarket Responses"--is the first to reveal Citizens' market share,which he put at about 23 percent for 2006 and 31.2 percent for2007. He estimates the share will rise above 35 percent in2008.

"There's really no public data," according to Mr. Kneuer.

In his view, state politicians are "trying very hard not to talkabout" how big Citizens and the Florida Hurricane Catastrophe Fundhave gotten and "what the potential downside is to the state," Mr.Kneuer said in an interview.

However, one official has sounded something of a warning. Thestate's chief financial officer, Adelaide "Alex" Sink, told aNational Council on Compensation Insurance conference in May thatthe state is "crossing its fingers" no big storm will hit, and thatCitizens is writing actuarially unsound policies.

The politicians in Florida, said Mr. Kneuer, "are definitelywhistling past the graveyard."

Florida legislators "entirely view this as something they canjust punt to the federal government," he said--referencing a remarkmade earlier this year by a former Florida state senator, who saidwhen lawmakers increased the size of the Florida HurricaneCatastrophe Fund in January, one intent was to "create a largefunnel" for the federal government to "pour money into."

Holborn's white paper is not the first to estimate the dollarimpact of a one-in-250-year event on Floridians. In May,Milliman--in a report commissioned by the Property CasualtyInsurers Association of America--put a $69 billion price tag onsuch a storm, also attaching a $26 billion figure to aone-in-25-year storm.

According to Holborn, its estimate of $53 billion in assessmentsequates to about $3,000--which represents about a month's averagetake-home pay--for every person in the state.

His $23 billion estimate for the catastrophe fund's exposure, heexplained, includes exposure to a $12 billion layer of coveragethat--as a result of insurance reforms signed into law inJanuary--sits above an existing $15.9 billion layer.

The catastrophe fund's ability to pay claims is backed by statebonding authority. The bonds, in turn, are serviced by policyholderassessments collected by voluntary carriers for most lines,including auto, at a maximum rate of 10 percent, according to thewhite paper.

Mr. Kneuer noted that Citizens' market shares presented in thereport--used to calculate Citizens' portion of a $147 billion,one-in-250-year loss--are conservative. The 31 percent share figurefor 2007, for example, is based on an assumption that exposures inthe voluntary market "won't grow," but they're likely to shrink, hesaid.

"We've seen USAA say they expect to lose 10 percent, [and] ourmedium-sized clients that dabble in Florida all have verydeliberate shrinkage strategies," he said.

"We visited a homeowners company yesterday that is getting ridof half its Florida volume," he reported.

Mr. Kneuer detailed some alternative assumptions for definingthe overall market that could easily put Citizens' share at 40percent by year's end, driving the assessment calculation evenhigher.

The 46-page white paper--which describes the prior law and thisyear's changes in the law, while providing maps showing exposuresto hurricane wind speeds along the Southeast coast, as well aspopulation density--will be available on the broker's Web site atwww.holborn.com.

In the event of a one-in-250-year storm in Florida, policyholderassessments for the state's cat fund and insurer of last resortcould hit $53 billion under the following scenario, noted PaulKneuer, chief reinsurance strategist for Holborn Corp.

o $23 billion in assessments from total limits losses to theFlorida Hurricane Catastrophe Fund.

o $25 billion in assessments to shore up the operating deficitat Citizens.

o At least $5 billion in guaranty fund assessments, assumingthat a one-in-250-year storm would bankrupt all "limitedapportionment companies"--small insurers writing the bulk of theirbusiness in Florida.