The "Shield Our State" Coalition is promoting a new public-private partnership that will increase financial security for Floridians in the wake of a catastrophic hurricane, stabilize residential insurance rates, and restore the private residential insurance market in the state.
The coalition is spearheaded by Dan Montgomery, a veteran financial and insurance professional, and other citizens aware that the state faces a potential financial disaster in the wake of another major hurricane. Montgomery unveiled the Shield Our State Coalition at the Florida Chamber of Commerce Property Insurance Summit in Orlando on Wednesday.
The coalition is already raising statewide awareness and support for its proposal and will ask the Florida Legislature to consider it during the 2009 annual legislative session, which begins in March. As part of its effort, the coalition is seeking partnerships with a wide range of statewide business and community groups, public officials and citizens, and encouraging Floridians to join its effort through a Web site (www.shieldourstate.org).According to the group, under the current problem-plagued system, state-created Citizens Property Insurance Corporation (CPIC) has grown to become Florida's largest homeowners' insurer and is charging artificially low rates. In addition, the Florida Hurricane Catastrophe Fund (FHCF) charges artificially low rates for re-insurance, the insurance sold to insurance companies to reduce their hurricane risk. Unlike private insurers, both CPIC and FHCF are not required to be appropriately funded, instead imposing post-event assessments to pay their claims.
Recent testimony indicates that neither CPIC nor FHCF could meet their financial obligations after the next major hurricane. Florida families are still paying special assessments because some insurers went bankrupt from the 2004-2005 storms. Floridians don't realize they face the potential of having to pay huge assessments - a hidden hurricane tax - that could cost thousands of dollars per family to cover losses if CPIC and FHCF can't pay. These assessments are issued on the homeowners, auto, boat and business policies of all Floridians.
Meanwhile, major brand name private insurers have been leaving or reducing their presence in Florida because state regulators have rejected increases in residential insurance rates - increases they claim are needed to cover future hurricane losses. 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.
Shield Our State's proposal would establish a new way to manage hurricane risk in the state by creating a "Hurricane Insurance Pool." The proposal calls for the State of Florida to set the premium rates that Florida residential property owners pay for hurricane coverage. Those hurricane premiums would be set aside in a new state-run tax-exempt fund, where they would build up over time and be used only to pay residential hurricane losses.
The role of private insurers' will be to write the residential policies, collect the entire premium and then pass through the hurricane portion of the premium to the state fund. Private insurers will cover all the other risks associated with our residential policies - such as fire, theft, and personal liability protection - while also handling policy administration and claims processing, areas they are much better equipped to handle than the state.