Beginning this Tuesday, writes the South Florida Sun-Sentinel, Florida's
insurance crisis takes center stage,...when legislators convene for a special session devoted solely to the state's property insurance mess and how to get out of it.
Along with higher costs for reinsurance resulting from the disastrous 2004 and 2005 hurricane seasons, which caused $35.9 billion in insured losses, beleaguered homeowners across the state are also being squeezed in other ways. According to the Sun-Sentinel, Floridians are
paying extra charges to bail out three state insurance safety nets: Citizens Property Insurance Corp., the state's insurer of last resort; the Florida Hurricane Catastrophe Fund, which offers cheaper reinsurance to Florida insurers; and the Florida Insurance Guaranty Association, which pays claims for bankrupt insurers.
In addition to two surcharges for Citizens, Florida property owners will pay a 1 percent assessment -- $10 for every $1,000 of annual premium paid -- for the next 10 years on all home, automobile, health and life insurance policies to cover a $1.55 billion deficit in the Florida Hurricane Catastrophe Fund after the 2005 hurricanes. And there are two separate, one-time assessments of 2 percent each for the Florida Insurance Guaranty Association that property owners insured by private companies must pay. Citizens' customers are exempt because Citizens isn't a private company....
Citizens, an offshoot of the agency started after Hurricane Andrew to serve as a safety net for Florida's property owners, is now the largest home and condominium insurer statewide. Its growth has been spurred by insurance companies going bankrupt or opting to drop policyholders at renewal time. For the thousands of Floridians running out of options for private insurers, Citizens is the only way to get coverage.
If history is anything to go by, the crisis in Florida, which stems from mismanagement and poor planning, a lack of accountability, myriad conflicts of interest, political opportunism, moral hazard, and the unintended consequences of government actions, will end up costing many people -- most likely taypayers across the state -- a lot of money.
What's more, it is unlikely to be a one-off development.
With a host of similarly deficient federal, state, and local government safety nets in place across the nation, including a vast assortment of loan guarantee programs and various state-run insurers of last resort (ILRs), it's only a matter of time before an armada of financial hurricanes begins to wreak widespread havoc.
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