Let's face it: Florida's current residential insurance system is broken. A single major hurricane could bankrupt our state – and insurance companies. Many Floridians are losing their residential insurance, many private insurers aren’t writing any new policies, and everyone’s tax dollars are being used to pay for basic residential coverage throughout our state. Our citizens could face as much as $100 billion in new assessments – beyond the premiums they already pay – if one major hurricane strikes.
Without a major change, Florida's future growth and economy are at risk, and all of us face higher costs and more hassles finding insurance protection.
It is time for a bold new solution to keep the residential insurance system secure in our state. The Shield Our State Coalition is proposing an innovative new public-private partnership between business and government that is the best solution to this problem. It is vital that we act now.
What Brought Us Here? A Brief History
When Hurricane Andrew struck South Florida in August 1992 - leaving billions of dollars in losses in its wake - our state's residential insurance market essentially collapsed. Andrew was a wake-up call to all of us. The reality sank in that with our rapidly-growing population and heavily-developed coastlines, Florida was at risk every hurricane season of a storm that could cause us billions more in residential property losses.
In response, state leaders activated an insurer-of-last resort - today known as Citizens Property Insurance Corporation (CPIC) - to provide residential insurance to people who couldn't find it in the private market. The state also created the Florida Hurricane Catastrophe Fund, a reinsurance pool that covers hurricane losses. Homeowners and commercial-residential property owners paid dramatically more for property coverage and found fewer options in the private market.
For a while, the wind didn't blow and things calmed down. But then came the devastating 2004 and 2005 hurricane seasons, when Florida was hit by eight more hurricanes in just an 18-month span, causing billions more in losses. Florida's insurance market was in turmoil again - and it continues today.
Since 2005, private insurers have sought to substantially raise rates in order to cover future risk and safely secure their customers' homes. When proposed rate hikes were challenged by Florida's Office of Insurance Regulation (OIR), many insurers either non-renewed their higher risk policies or left the market altogether.
Meanwhile, state-created Citizens Property Insurance Corporation (CPIC) has grown to become Florida's largest homeowners' insurer - a far cry from its originally intended role as an insurer of last resort. Charging artificially low rates, CPIC is not required to be appropriately funded, instead conducting post-event assessments to pay their claims. The Florida Hurricane Catastrophe Fund, likewise charges artificially low rates for the reinsurance it requires private companies to buy, is also mandated to assess for post-event borrowings, but is also not required to pay its obligations at all, if it can't find funding !
Today, there are serious questions as to whether CPIC or the Cat Fund will be able to pay all their homeowners claims after the next major hurricane. In fact, recent projections show the Cat Fund could face an $18 billion shortfall in its ability to pay claims, with Citizens facing an additional $10.5 billion !
Additionally, most of the new private insurers entering Florida are small, start-up, "take-out" companies that respected rating agencies say could be at financial risk if a hurricane hits.
On top of all this, all Florida families face the potential of having to pay state assessments - a hidden hurricane tax - that could cost Floridians thousands of dollars per family to cover losses if CPIC and the Cat Fund can’t pay. Many Floridians don't even realize these assessments exist, or that they are already paying them on their home and auto policies.
Against this backdrop, the Shield Our State Coalition's position is simple: we must act now. It is time for all Floridians to deal with this issue. We can't wait until another hurricane disaster strikes - a disaster that all of us, and our children, could be paying for over many years to come. For this reason, we're calling on business and government to come up with a new solution to deal with this issue NOW.
