Insurers, Republicans Cool To Proposed Hurricane Fund

The plan would restructure the state's Hurricane Catastrophe Fund into a new entity modeled on the National Flood Insurance Program. (See NU, Oct. 24, page 8.)

Policies would be written by insurance companies offering homeowners insurance on behalf of the fund, in an effort to provide homeowners with a single point of contact.

Should the proposed Hurricane Fund be overwhelmed by a major storm or series of storms–as the NFIP has been by Hurricane Katrina–the fund would be allowed to:

o Float bonds.

o Borrow from a federal disaster fund (if one is created).

o Buy reinsurance (if necessary).

The changes, the Democrats said, would stabilize the market as well as lower rates through increased competition and improve the insurance industry's efficiency in dealing with hurricanes.

However, while achieving some sort of stability is a primary concern for insurers, it's not something they see being achieved by crafting more new programs and regulations, according to industry officials.

Julie Pulliam, a representative for the American Insurance Association, noted the group is still reviewing the proposal but said AIA generally does not see the benefit of "changing the rules of the game" from a regulatory standpoint.

"The bottom line is we need stability," she added.

William Stander, regional manager for the Property Casualty Insurers Association of America, said he was willing to "give credit to the Democrats for coming up with some sort of proposal, although I disagree with their direction."

Much of the proposal, he said, is effectively a "shell game," in that "the money has to come from somewhere" to provide the savings the Democratic lawmakers promised.

He said insurers would instead prefer to see more "market-based" reforms involving "less government strait jackets, not more."

Florida Republicans are taking a cautious approach. Towson Fraser, a representative for Florida House Speaker Allen Bense, R-Panama City, said Republicans are "still looking" at the proposal and acknowledged there is some need for reform.

However, he said the target of the Democratic proposal–the Hurricane Catastrophe Fund–may not be the ideal primary target for change.

"There are a lot of people who feel the catastrophe fund is working exactly as it's supposed to," he said, noting that it weathered four major hurricanes last year and two more in 2005, yet is not in financial trouble.

However, "there's definitely a lot of room for improvement" in the Citizens Property Insurance Corp.–the state's insurer of last resort, he acknowledged.

Mr. Stander argued, however, that Citizens is not where blame should be laid, contending it would be a "misnomer" to label the company as troubled.

"Citizens is doing exactly what it was meant to. It just wasn't meant to have policies for a million people," he said.

PCI would rather see more "market-based" reforms involving "less government strait jackets, not more."