As Florida lawmakers’ 60-day legislative session continues to move forward, there are some unsettling signs that efforts to reform the state’s Florida Hurricane Catastrophe Fund may be stalled in the House.
Among those who remain both hopeful and insistent that reform can come this year is the man responsible for overseeing the Cat Fund itself: Chief Operating Officer Jack Nicholson. Nicholson has put forward a reform plan — currently sponsored in the House by Rep. Bill Hager — that looks to address an operating structure that has seen the fund project shortfalls in the three of the past four years, including a $3.2 billion shortfall in 2011 and a shortfall of greater than 50% in 2008.
“It was 52%, I believe, about $14.5 billion, and if we had had a loss that year, that would have been a major catastrophe for the state,” Nicholson said in an exclusive interview featured in this week’s edition of the FIRE Podcast.
Among the provisions of Nicholson’s plan — which would end the fund’s optional Temporary Increase in Coverage Limit layer and reduce its mandatory coverage from $17 billion to $12 billion over three years — is an increase in private insurers’ co-payment from 10% to 25% over a three-year period.
That really puts more skin the game for insurance companies and we think it would motivate them to settle claims more properly than what we’ve witnessed in ’04 and ’05. If they had to pay their own money or money (from) their reinsurers, we feel like the reinsurers would have enough discipline to cause some pain in the marketplace if they were acting improperly. We don’t have that discipline, because we’re a mandatory program.