First AIG, next Florida cat fund?
Without yet deciding their own options to solve the problem, Gov. Charlie Crist and the Cabinet members lobbied again today for the federal treasury to solve the $20 billion hole in Florida's hurricane catastrophe fund.
Here's the rationale from Chief Financial Officer Alex Sink:
"The difference this year is, we've seen the federal government step up and they have bailed out you name it -- AIG, the banks, the $750 billion stimulus package -- and so my question would be: OK, there's a precedent set here so why not $20 billion to help Florida get over kind of a hump?" Sink asked.
But don't call it a "bailout," she said.
Sink said the difference is Florida has a dependable "mechanism" to repay money from the federal government. The state is looking for a line of credit or a promise to buy bonds to shore up the promises made to help cover losses. But no deal has been reached, and Sink worried that "we don't have a coordinated effort."
"Even if there isn't some kind of formal acknowledgment by Treasury or the Congress, the reality is the federal government comes in anyhow -- we all know that -- eventually," Crist said, referring to FEMA aid.
The mechanism? Policyholders, who could face decades of assessments under worst-case scenarios for hurricane damage.
Absent federal help, Sink and Crist pressed for a menu of financing options that are now expected to come in a month or so. It could include an option similar to the deal last year with Warren Buffett's firm. The state cringed and paid $224 million for the right to finance $4 billion.
But cat fund officials warned the cost could be steeper this year, and the cost likely would be included in insurance rates -- and passed down to policyholders to pay.