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In a just-released “Governor’s Transition Decision Handbook” from Florida TaxWatch, one of the “prominent issues” cited is the “Significant ‘contingent liabilities’ faced by all Floridians including those resulting from, Medicaid eligibility expansion and cost increases, the escalating cost of prisons and incarceration, and the undercapitalization of Citizen’s insurance.” The private, non-profit, non-partisan research institute has been publishing a transition handbook for new governors since 1998. The year’s 84-page book contains a briefing on property insurance, in which it notes that the multi-storm seasons of 2004 and 2005 caused $33 billion in insured losses for 2.8 million Florida homeowners. It cites specific issues with the current system of the state-run insurance structures — Citizens Property Insurance Corp., the Florida Hurricane Catastrophe Fund, and the Florida Insurance Guaranty Association: Citizens premiums have been kept artificially low, which has led to an insurance system prone to costly shortfalls as a result of actuarially unsound rates and a systematic reliance on assessments to fund them. “The solvency of the CAT Fund as the policies’ reinsurer is also uncertain because it holds underfunded liability without any private reinsurance and a limited capacity to issue tax exempt debt bonds to pay for deficits in damage payouts in the event of a storm. “Currently, Citizens’ total exposure is $426 billion with a 1-in-100 storm estimated to cost $23 billion. The potential shortfall from a major storm would be financed with assessments on all lines of insurance in the state, which will have a substantial immediate and long-term negative impact upon Florida’s business climate.” The report concludes that, “Florida needs to consider and analyze ideas for a systemic overhaul of the state property and casualty insurance system.”

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