Florida has approved issuance of up to $10 billion in short-term loans to shore up the state's hurricane catastrophe fund.
The action came at the State Board of Administration meeting yesterday in Tallahassee in an effort to give the fund enough cash on hand to pay claims for six months while it arranges longer-term financing to cover the $28 billion risk it now carries.
Earlier this year the legislature expanded the catastrophe fund capacity to provide cheap reinsurance for primary carriers in an effort to get the primaries to reduce their rates from savings the program would provide.
William Stander, regional manager for the Property Casualty Insurers Association of America, said the action by the board signifies that the reforms approved earlier are "flawed and in need of significant improvement."
"We hope that the stopgap measure of expanding the catastrophe fund does not take away from the need of lawmakers to address more comprehensive reforms in 2008," Mr. Stander said.
Florida has been seeking other options ranging from catastrophe bonds to be sold abroad to the purchase of coverage from the offshore markets to offload some of the risk incurred by the legislature's action.
At the meeting yesterday, Republican Gov. Charlie Crist continued his war of words with the insurance industry when he was quoted as saying, "I don't know what risk they have left, to tell the truth."
His comments came after premium reductions that had been expected to result from the expansion of the hurricane catastrophe fund failed to materialize as primary insurers still used the private reinsurance market to buy coverage for more severe and frequent storms.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.