Sen. John Thrasher: Financial relief we cannot pass up
Published: Saturday, October 6, 2012 at 9:02 a.m.
Last Modified: Saturday, October 6, 2012 at 9:02 a.m.
Citizens Property Insurance Corporation (Citizens) was created to be Florida’s insurer of last resort for those who could not access coverage anywhere else. Shockingly, over the past 10 years, it has grown into Florida’s largest insurer, dwarfing companies like State Farm, Allstate and Nationwide.
With 1.4 million policyholders and 30,000-40,000 new customers per month, Citizens has become the first choice for coverage for too many Floridians.
That’s a problem because insurance is based on spreading risk and, in this case, the risk is all highly concentrated in one company. And not just any risk but the highest risk, all of Florida’s coastal property, the most expensive and vulnerable property in the state.
Why should you care? Well, if you are a Citizens policyholder, you should care because you are subject to a hurricane tax of up to 45 percent on your home insurance premium if Citizens’ reserves are depleted following a hurricane and that is just the beginning. For the policyholders who do get taken out under this plan, they won’t be liable for the potential 45 percent initial Citizens tax they would have been charged. That could amount to thousands of dollars.
If you are a Florida property owner who is NOT insured by Citizens, you could be subject to a hurricane tax of up to 32 percent and most other insurance policies are subject to additional taxes. That amounts to a crippling $3 billion tax on virtually every Florida resident who owns a house or a car or a business.
So how likely is that? Consider that, on average, Florida can expect to be hit with an intense storm every three years, and it’s been five years since we’ve been struck. Florida is overdue. Consider, too, that forecasters predict an increase in major hurricane activity over the next two to three decades.
A big storm is coming, and if we fail to shrink Citizens, we all will be left holding the bag for many years to come.
That’s why the plan to shift up to 400,000 policies from Citizens to private insurers is so vital. Under the program, private insurance companies that meet rigorous tests of financial strength would qualify for long-term loans from Citizens to assume these policies.
The loans would be repaid over the next 20 years with interest. They are necessary because the insurance commissioner has determined that the Citizens rates the companies would inherit are too low. The loans would allow the companies to comply with required financial benchmarks under state law and transfer the policies with no rate change.
That’s a small price to pay to shift risk off the backs of Floridians and onto private companies. To get the kind of reduction in exposure this program will provide, Citizens would have to spend $2.4 billion over ten years. This $300 million one-time loan will bring more benefits than that reinsurance yields, and it will be permanent.
Critics who would delay and wager that the wind won’t blow are playing poker with taxpayers’ money. Times are tough, and this is a risk we simply cannot take.
This plan to cut taxpayers’ risk by one-quarter can be on the books as soon as December 4. Don’t let political pandering get in the way of this critical relief.
John Thrasher is a member of the Florida Senate