Florida Storm Insurance Rates May Drop

After nearly a decade without a major hurricane, residents may see a decrease in their Florida storm insurance premiums. Florida storm insurance rates currently run at twice the national average, with annual premiums of more than $2,000 for state residents. However, the lack of major claims has led to a boost in the state’s insurance industry. Florida Insurance Commissioner Kevin McCarty told a Miami television station that he “fully expect(s) insurers to submit lower rate requests.”

Florida Storm Insurance and “Hurricane Tax”

The decrease could come from a potential repeal of the state’s “hurricane tax”, a fee that insurers charge to coastal residents to pay off claims from previous years. The Florida storm insurance commission has added the surcharge to both homeowners and auto insurance to cover the costs of past hurricane damage. Florida storm insurance policy holders may see the surcharge subtracted from their bills as soon as this summer.

Reinsurance Costs Driver Up Florida Storm Insurance Rates

A major factor in the Florida storm insurance market is the cost of reinsurance. When Florida storm insurance providers encounters numerous claims, as they often do after a major hurricane, they call on out-of-state or overseas insurers to offer reinsurance and help the in-state providers pay off those claims. Without a major storm in the state since 2005, Mr. McCarty also stated that he expects reinsurance rates to fall and that insurers will “pass along savings to consumers.”

“Cat Fund” Backs Up Florida Storm Insurance Providers

A unique aspect to Florida storm insurance law is the Florida Hurricane Catastrophe Fund , also known as the “Cat Fund”. The Cat Fund is a program administered by the Citizens Property Insurance Corporation, a state-operated Florida storm insurance provider. The Cat Fund is an insurer of last resort for many homeowners who either fail to qualify or cannot afford private homeowners insurance. The Cat Fund also acts as a source of reinsurance for the state’s private insurers.

Dispute Over Florida Storm Insurance Rates

The high risk involved in owning coastal property has been highlighted due to the impending Atlantic hurricane season. Advocates of Florida storm insurance reform measures point to this risk as reasons to persuade residents to move away from relying on the Cat Fund and going with private insurers. The measure has been largely successful, as nearly a million Florida storm insurance policy holders have transferred their policies from Citizens Property Insurance to private insurers.

Source: WPLG-TV (Miami)

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