Grass roots effort touts solution to property insurance problems

Armed with a new economic study touting potentially billions of dollars in long-term savings, a grass roots group is revving up an effort to overhaul the state's troubled property insurance market.

The proposed setup, in simplest terms, is to place all hurricane insurance coverage now split between private insurers and the state-run Citizens Property Insurance Corp. into a single, public-private pool.

But leaders of the Shield Our State Coalition acknowledge it isn't so simple to get legislators in Tallahassee to rally behind them. And the clock is ticking.

"We have 21/2 weeks left in our current Legislative session and six weeks left before hurricane season (begins). The Legislature must act now," said Dan Montgomery, a longtime catastrophe claims adjuster and managing director of the coalition.

To garner some attention, the group commissioned Florida economist Hank Fishkind to analyze their plan's benefits. Under three scenarios of heavier-than-average hurricane damage over the next 20 years, Fishkind said the public-private investment pool could save ratepayers between $39 billion and $119 billion.

Lawmakers currently have focused on a two-pronged approach in the latest insurance "fix" — letting Citizens gradually raise premiums to more realistic market rates and to reduce the exposure of the Florida Hurricane Catastrophe Fund (or Cat Fund), the state-run entity that sells cheap reinsurance to help insurance companies cover claims from catastrophic losses.

Shield Our State's plan is to create a state-managed, tax-exempt fund dubbed the Hurricane Insurance Pool, absorbing functions of the CAT Fund as well as Citizens. The pool would use the hurricane portion of property insurance premiums for all residential property insurance policyholders in the state. Instead of relying on a mix of reinsurance and bonds to support the system, the pool would opt out of reinsurance and, instead, try to sell $20 billion in bonds. If there's no storm, it could invest those funds in 10-year Treasury bonds.

Fishkind conceded that it would be difficult to float a $20 billion bond in current financial markets but that there's "a good appetite" for a series of smaller bond issues offering returns 3 percent higher than Treasury bonds.