R Street welcomes bill to scale back Florida Hurricane Catastrophe Fund
The measure addresses the state-run reinsurer’s precarious financial position. Estimates from the Cat Fund’s own financial advisers suggest it would face a $1.5 billion shortfall in the amount of money it could raise in the capital markets to cover its claims following a major hurricane, and potential much larger shortfalls in subsequent years.
“The House Insurance & Banking Subcommittee made a responsible public policy decision today that will shore-up Florida’s property insurance market and safeguard the state’s economic future,” said R Street Florida Director Christian R. Cámara. “Right-sizing the Cat Fund so that it can actually make good on the coverage it sells not only helps to avert an unprecedented economic crisis following a bad hurricane season, but will also send a signal to property insurers looking to bring their capital into Florida that we are open for business. This is certainly a step in the right direction, and one that the Senate should follow.”
Under the bill, the Cat Fund’s exposure under its mandatory layer of coverage – which all residential property insurers doing business in the state must buy – will be reduced to $16.5 billion in 2014, to $15.5 billion in 2015 and to $14 billion in 2016.