Fla. Gov. To Use Earlier Primary Date As Wedge To Get National Disaster Fund

Gov. Crist responded that "most major insurers, in fact, are operating in the state of Florida, but they're operating now on a level playing field where the consumer's rights are being heard, too, for the first time in a long time." He praised Senate President Ken Pruitt, who he said "led the charge to be able to make sure the insurance industry wasn't taking advantage of Floridians anymore."

He then said high insurance rates in areas of catastrophic storms "is a national issue. It's an opportunity for us to push for a national catastrophic fund."

"We already have one [state catastrophe fund] in the state of Florida," he said. "And I know that candidates for president in next year's elections are talking about this because of something else we have done that I think is smart in Florida–we moved up our primary. Our primary is now January 29th of 2008, and it's an important thing to do, to get these kinds of issues that are not just important to Florida but to America on the front burner."

Ms. Burnett responded by asking: "Isn't 'catastrophic,' though, just another way of saying, 'We're going to have people who live either in the center of the state of Florida or somewhere like Iowa actually picking up the tab for people who choose to live on Miami Beach and won't pay market rates for their insurance?'"

Gov. Crist responded: "I don't believe that's the right way to look at it because if you ask people in Kansas about tornados, that's not exactly a coastal state, but they sure could [take] advantage from a national catastrophic fund. Or blizzards in Michigan or in the North."

He noted that "some of these storm predictions show that some might go up to New Jersey or New York this year. You never know where they're going to come [from], or earthquakes in California, or fires, as we've had recently here in Florida and other states."

The governor added, "What I think is important is the federal government's going to come in, anyway. Ultimately, they did in Katrina. Why not do it in a smart fashion? Why not do it in a way where we can get the premiums upfront, collect some interest on the money while it's there, and since the government's going to come in anyway to protect us from these natural disasters, let's do it in a way that's smart and makes common sense."

Florida has frozen rates for Citizens, increased the size of its Catastrophe Fund to provide cheap reinsurance to carriers, and moved to restrict the use of national insurer subsidiaries. A number of sources, including the state's chief financial officer, have called the moves an actuarially unsound gamble.

Earlier this month, a former Florida state senator predicted at an insurance conference that if devastating losses deplete the Florida Hurricane Catastrophe Fund, the federal government will step in to shore it up.

Locke Burt–a Republican who formerly represented the Ormond Beach, Fla., area and now is president of Royal Palm Insurance Company and Security First Insurance Company in Ormond Beach–suggested that current lawmakers were banking on that possibility when they crafted reform legislation earlier this year.

Responding to a question during a session of the Casualty Actuaries on Reinsurance meeting in Philadelphia, Mr. Burt predicted that the federal government would "absolutely" help Florida out after a major storm, reasoning that the federal government promised $100 billion to Louisiana after Hurricane Katrina.

"Florida has 27 electoral votes. It's a swing state," he said, suggesting Florida would get at least as much attention from Washington as Louisiana did.

Mr. Burt, who attended a special legislative session in January as a business representative, reported that during the debate over catastrophe fund proposals, senators suggested that "one thing they were trying to do was create a large funnel" for the federal government to pour money into, "and it would go to actually paying claims as opposed to disappearing in some swamp."

Opting for a post-funding mechanism rather than prefunding the loss, legislators reasoned that after the loss, "we're going to know exactly what it is. It's just a question of paying for it," Mr. Burt said.

They further reasoned, "We will either have cash in the till, or we raise taxes, or we sell bonds, or go to the feds–or do all of the above," he said.

It is recognized, however, that while the federal government will likely give Florida a lot of money for a big event, "if we have a lot of small events, there's going to be a lot less sympathy," commented Mr. Burt.

Meanwhile, Florida's legislative remedy to halt escalating homeowners' insurance costs will not be duplicated elsewhere despite its perceived popularity there, one insurance executive predicted.

"There were fears that others would pursue Florida's example, but the other states have stepped back," said Glenn Pomeroy, vice president and head of regulatory affairs for Swiss Re. "It was tempting [for them, but] they do not want to go in that direction at all."

Speaking last week during an issues briefing in New York given by the Zurich-based reinsurer, Mr. Pomeroy specifically addressed legislation in Louisiana where officials looked at a similar answer but "did not want to take that gamble."

Instead, Louisiana is pursuing more creative answers that include incentive programs to bring private insurers back into the state. He said other states, notably South Carolina, are following the same route in pursuit of public-private initiatives.

"Every state is going to go against Florida's lead," Mr. Pomeroy told National Underwriter, despite the ongoing popularity of Gov. Crist, who continues to receive high approval ratings in the state for his actions.

Mr. Pomeroy called Florida's solution temporary, and an answer that policyholders may find in the end will "far exceed the savings" they are experiencing today.

If there is one benefit for other states from Florida's action, Mr. Pomeroy said, it would be the reallocation of capacity. With private insurers leaving the state, insurers will reallocate that capacity, helping surrounding states.