The Florida Hurricane Catastrophe Fund could face a significantshortfall if a major storm hits Florida this year, the state'sinsurance commissioner told a State Senate committee yesterday.

Kevin McCarty, Florida Insurance Commissioner, speaking beforethe Florida Senate Ways and Means Committee, said there is a"cratering" of the financial sector due to the economic downturn,and municipal bonds are being affected as well.

Municipal bonds, Mr. McCarty said, are "the backbone of funding"for the hurricane fund, which backs up the private market in thewake of a hurricane by providing reimbursements to insurers for aportion of their catastrophic hurricane losses.

The fund sells bonds to cover claims after the fund runs out ofmoney, Mr. McCarty explained, but in today's environment, the fundlikely cannot sell enough bonds to cover the claims should a majorstorm hit.

He said there would be a "significant shortfall" in bond salecapacity.

Mr. McCarty said it is "critical" to come up with either aprivate or public solution, as insurers will be in the marketlooking for reinsurance coverage for the hurricane season in 30-45days and there needs to be certainty that the fund has the abilityto meet its obligations.

Some legislators on the committee sought to address otherinsurance issues when questioning the commissioner, includingcircumstances surrounding American International Group (AIG), StateFarm's recent decision to exit the state property market, and thelegality of tying homeowners policies to other coverages such asauto.

Regarding State Farm, Sen. Al Lawson, D-Tallahassee, called theinsurer's exit a "travesty" and told the commissioner he should goback and ask the insurer to come back to the market.

Committee Chairman Sen. J.D. Alexander, R-Lake Wales, said manypeople replacing State Farm policies are paying more than what theywould have been paying had State Farm been granted its requestedrate increase.