The magnitude of the insurance problem in Florida is so big that no blog post or newspaper story, or even a series of newspaper stories, can adequately explore the whole thing. You’re talking about some extra-long piece in The New Yorker or The Atlantic just to try to do justice to all the ins and outs. But this story by Peter Whoriskey in the Washington Post does a very good job of addressing the two principal problems with the recent Florida insurance "fix."
First, Florida has promised to provide a reinsurance pool of up to $32 billion in its state catastrophe fund, but it has less than $1 billion of that on hand. Last night, I re-listened to a January 30 A.M. Best podcast with Steve Geller, minority leader of the Florida Senate, and he acknowledged that the fund may not be built up to the desired levels for five to 10 years. In the meantime, Geller said, if Florida is hit hard by hurricanes, the state will be able to raise revenues to cope without collapsing. Perhaps, but if the catastrophe fund had to pay out tomorrow, each of Florida’s 17 million residents would have to come up with nearly $2,000 each to make up the shortfall. Add a $5000 to $6000 bill per household to the high insurance premiums people are paying and you’re looking at people forming a posse to go after Gov. Crist and the Legislature, not to mention some serious economic problems.
Second, Citizens Property, the state-run insurance company, already was broke before legislators forced it to rollback a premium increase. If it is charging artificially low rates, how is it going to pay out without state taxpayers forming a bucket brigade from their savings accounts to state government? In all of this, there is an air of unreality, because there is a hidden substory: like any other place, in the event of a massive disaster, Florida is counting on insurance through USIC — the Uncle Sam Insurance Co. — and expects a federal bailout. I doubt any legislator really expects that the country is going to sit back and let Floridians bear these costs by themselves.