Following back-to-back multi-hurricane seasons, Florida's property insurer of last resort is expected to run a deficit of $1.7 billion for 2005, a report to the state's House Insurance Committee warned.
Florida Chief Financial Officer Tom Gallagher reacted by urging that surplus sales tax revenues be used to make up the Citizens Property Insurance Corp.'s estimated deficit. Normally, any Citizens deficit is funded by assessments on the state's homeowner insurance writers, who then can pass them on to their policyholders.
Mr. Gallagher said the House Insurance Committee's receipt of the report should galvanize policymakers into rethinking how the deficit is funded. News of the deficit, he said, "reinforces the need for immediate rate relief for Florida's property owners, which can be accomplished by using surplus sales tax revenue to offset insurance assessments."
A representative for Mr. Gallagher, Bob Lotane, said sales tax revenues used to fund the Citizens deficit would be the surplus monies collected due to increased business activity because of the storms. He said economists estimate that up to $800 million of excess sales tax revenues resulted from the 2004 hurricane season, while estimates from last year's storms are in the $500 million area.
Sam Miller, executive director of the Florida Insurance Council, said that in general the industry does not oppose using so-called "windfall" sales tax revenues for rate-payer relief. He said the significance of the $1.7 billion deficit figure is that it is up from an estimate in January of about $1.4 billion, and that without some relief rate-payers would face a Citizens assessment in the mid-teens.
A Citizens representative, Justin Glover, said the interim deficit report was requested by the Insurance Committee to aid them in deliberations on a bill that would permanently alter the manner in which the company is funded. He said the auditors are expected to finish their report next month, which will produce the shortfall figure that will be the subject of the assessment.
On March 23, the House Insurance Committee approved a bill that would call for 40 percent of windfall sales tax revenues to go to both Citizens and the Florida Catastrophe Fund, with the remaining 20 percent going to mitigation efforts. But that bill would only apply to the 2006 season and beyond.
Last year, Mr. Glover said lawmakers considered funding all or part of the deficit with sales tax revenues, but ultimately decided against it. For them to do it this year, a special appropriation would have to be approved.
Republican Governor Jeb Bush is said to take a different approach–using the excess sales tax for homeowner rebates.
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