A Florida lawmaker, who has opposed the state's expanded role as a reinsurer, said regulators will probably not allow insurers to pass through the cost of additional reinsurance coverage beyond the state-subsidized catastrophe limits.

Rep. Don Brown, R-DeFuniak Springs, told NU Online News Service the current situation is "pathetic" in that primary insurance companies are forced to rely on what he termed the questionable capacity of the Florida Hurricane Catastrophe Fund to bail them out in the event of catastrophic losses this hurricane season.

Earlier this year, the Legislature expanded the capacity of the fund to provide more affordable reinsurance with the aim that primary companies would reduce rates through the savings.

Mr. Brown said he was one of only two lawmakers who voted against the measure and as a result was stripped of his role as chairman of the House panel overseeing insurance issues.

"I am decapitated now. There is nothing else they can do to me," he said.

A survey of reinsurance brokers by National Underwriter found that prices did not drop for private reinsurance as drastically as feared because companies were buying additional layers of coverage or in the eyes of some regulators duplicating coverage offered by the catastrophe fund.

Office of Insurance Regulation spokesman Jonathan Kees said companies will not be able to pass through costs of duplicative reinsurance coverage.

Mr. Brown said it remains unclear whether or not the catastrophe fund is backed by the State of Florida's full faith and credit.

"I think the regulators should let primary companies pass through the coverage, but I don't think they will," he said.

Mr. Kees said initial projections of premium reductions averaged out to 19 percent on a statewide basis, but the real test will be this September when the so-called "true-up" of reinsurance costs take place.

"If they really pass through all the reinsurance costs and the premium reductions are not that great, then voters will have a right to ask what the state got for taking on so much additional liability," said on leading broker.

Special Reports /

Fla. Carriers In Reinsurance Bind, Says Lawmaker

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