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Florida’s government run Citizens Property Insurance Corporation is putting the state at risk of bankruptcy in the even of a catastrophic hurricane. Citizens has become the largest insurer in the state by under-pricing the risks of a major catastrophe, even though the possibility of a significant hurricane is always looming. The nation’s major insurers have pulled out of the state—Allstate, Nationwide, Prudential, USAA, and most recently State Farm, which had previously insured more than a million homeowners across the Florida.
The state’s Citizens Property Insurance Corporation is now the major property insurer. At the same time, Florida is having a hard time finding buyers for bonds to support its $29 billion reinsurance exposure—with a shortfall as high as $18 billion. In the even of a major storm, who will pick up the tab?
It is clear reforms are urgently needed to foster a more robust market for property casualty insurance, preferably before the 2009 hurricane season begins.
Senator Mike Bennett (R, District 21) is leading the way on reform. Bennett introduced Senate Bill 2036, which would provide consumers a choice and a degree of certainty by allowing them to purchase insurance that cannot be assessed with a hurricane tax. When the next big storm hits and the Citizens Insurance needs a multi-billion dollar bailout, Senate Bill 2036 will keep non-Citizens policy holders from having to bail out the state run insurance company.
Tom Gaitens, FreedomWorks State Director in Florida will be testifying at today’s Senate hearing in Tallahasse. Gaitens commented:
“Major insurers have already left the state. Without a viable insurance market, Florida’s growth and economic development are at risk as businesses opt to locate in state’s where there is a greater degree of certainty and availability in the insurance market.”
“Senate Bill 2036 is a major step in the right direction by providing consumers an opportunity to purchase insurance coverage without the potential for a hidden tax after a major storm. At the same time it encourages the return of capital and a larger insurance market with more options. The legislation would ease some of the regulatory impediments that have led many insurers to abandon or cut back their operations in the state and is an important step towards building a functioning market for insurance in Florida.”