Over the weekend, the Wall Street Journal weighed-in on Florida’s insurance crisis, shedding light on the concerns economists, actuaries, insurance experts, consumer advocates and Heartland Institute analysts have been warning about since former Gov. Charlie Crist drastically and dangerously expanded the state’s role in the property insurance market.
In a Feb. 17 editorial, the Journal lauds the efforts of Gov. Rick Scott and other state lawmakers who understand the need for reforms to state-backed Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund, despite the political risks involved in supporting policies that may gradually and methodically increase rates.
On the CAT Fund issue, the Journal opines:
[The CAT Fund] also has problems, and here too Republicans have stepped up with good ideas. Senator J.D. Alexander and Representative Bill Hager want to shrink its size, bolster its capital base and reduce its ability to levy taxes to cover deficits. The main obstacle is Port Orange GOP Representative Dorothy Hukill, who chairs the Economic Affairs Committee and pulled the Hager bill from consideration last month, claiming the text “wasn’t ready.”
Much of the credit for the progress so far belongs to Governor Scott, who is risking short-term unpopularity to protect taxpayers from a future disaster. This is what political leaders are elected to do.
Absent the necessary reforms, Floridians risk not only having to bail out Citizens and the Cat Fund through dramatic and unprecedented increases in the cost of their overall insurance—auto, homeowners, business, etc.—but the very real possibility of the existing system not being able to meet its claims obligations. In fact, Florida law currently requires the Cat Fund to sell reinsurance coverage that it cannot realistically pay for. And lawmakers know this.
If a sufficiently bad hurricane season impacts Florida, thousands of homeowners will likely be left with their hurricane claims at least partially unpaid, which would immediately plunge the state into an economic tailspin. It is legislators’ moral obligation to enact the reforms necessary so the Cat Fund is able to meet its obligations. Anything short of that is no different than knowingly peddling Floridians a defective product.
