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You're still on the hook for 2004-05 hurricane season

By Jennifer Liberto, Times Staff Writer
In print: Wednesday, June 11, 2008

In October 2005, Jeff Powell tries to collect some of his belongings from a Miami apartment complex, which was leveled by Hurricane Wilma.
	[DOUGLAS R. CLIFFORD | Times (2005)]

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ADVERTISEMENT Related Links Against the wind: Seeking a property insurance solution Hurricane Guide: help before, during, after the storm

TALLAHASSEE — That sucking sound you hear is a 3-year-old hurricane pulling money out of your wallet.

Gov. Charlie Crist and Chief Financial Officer Alex Sink on Tuesday voted to have the state take on $625-million in additional debt to cover claims from the 2004 and 2005 hurricanes, mainly Hurricane Wilma. The third member of the State Board of Administration, Attorney General Bill McCollum, was absent due to a medical procedure to correct a clogged artery.

Who will pay off the debt? All property, car, motorcycle and boat insurance policyholders, who will see a six-year, 1 percent assessment on their premiums extended for another two years.

Crist and Sink acknowledged that Floridians will feel pinched, particularly because the new debt comes on top of other assessments that are covering the losses of state-run Citizens Property Insurance Corp. and the failure of private Tampa insurer Poe Financial Group.

"It's really a tax on insurance policies that homeowners and businesses are already paying," said Sink. But they said they had little choice.

The money is needed for the state catastrophe fund, which provides reimbursement to insurers for a portion of their losses after a catastrophic hurricane. Insurers bought the so-called "reinsurance" policies from the fund before the hurricanes.

The system was set up after 1992's Hurricane Andrew to help keep premiums low for Floridians. The state sells its reinsurance far cheaper than the private reinsurance market.

But when the state fund hasn't collected enough in premiums from insurers to pay off post-storm claims, Florida law allows the state to assess insurance policies to pay off the debt.

Since 2006, Floridians had been paying 1 percent of their auto, boat, motorcycle and homeowners insurance premiums each year to cover $1.35-billion in bonds originally sold to pay catastrophe fund claims. That was supposed to last six years.

But more hurricane claims have been rolling in from the 2004 and 2005 storms, requiring the new $625-million bond issue. So Crist and Sink agreed to extend the assessments for two more years.

Insurers say the increase in claims is because more claims have been reopened by public adjustors, who provide homeowners an independent assessment of their damage and earn a percentage of claim money.

Hurricanes in 2004 caused $16-billion in damage and $11-billion in damage in 2005.

The total catastrophe fund bill, so far, is $3.95-billion for 2004 storms and another $5.2-billion for 2005 storms. That's more than $1-billion over original estimates.

Bob Milligan, who oversees the Cat Fund as the SBA director, said the claims have risen due to "very aggressive" public adjustors who are "out there shaking the bushes trying to make some money."

"There really is no concrete answer other than we know that insurance companies are seeing a lot of reopened claims," he said.

Right now the fund has about $180-million left to pay claims from the 2004-05 storms, which is expected to last between 10 and 20 weeks.

At first, Crist was hesitant to vote to agree to additional debt, saying he was concerned that insurers were not being diligent enough at policing claims.

"When I start to hear that maybe it's illegitimate or some monkey business going on here, it gives me less confidence to vote affirmatively on this item," he said.

While nearly all insurers reported more reopened claims, the largest number came from Citizens Property Insurance Corp., which is no surprise since the state-run insurer is the largest purchaser of catastrophe fund coverage.

The state-run insurer is also the largest insurer in South Florida, where there has been a push to reopen claims.

"As good stewards of our customer's premiums, Citizens would not knowingly or willingly pay fraudulent claims," said Citizens executive director Scott Wallace. "We have internal quality assurance processes in place to ensure that claims receive a thorough review with proper documentation before they are paid.

Cat Fund officials said they plan to audit a sample of the new claims, to see what percentage of claims are legitimate.

How we'll pay the bill

State takes out bonds: When the Florida Hurricane Catastrophe Fund has more claims than money to pay them, it borrows money to pay the claims.

You pay based on what you insure: Under law, insurance policyholders pay the debt through assessments on homeowner, auto and boat policies. Before Tuesday, it was a 1 percent annual fee for six years. Tuesday's vote extended that to eight years.

Bottom-line cost to you: On a $3,500-a-year homeowner's policy, the assessment is $35, or $280 over eight years. In addition, on a $1,000-a-year auto policy, the assessment is $10; $80 over eight years.

Other assessments from '04, '05 storms

• Starting last year, Citizens Property Insurance Corp., the state-run insurer, assessed all property insurance policies a 1.4 percent fee on premiums to cover losses. The assessment will last 10 years.

• Three times in the past two years, the state has assessed all auto, property and boat insurance policies a 2 percent fee on premiums to cover unpaid claims from Poe Financial Group, the Tampa insurer taken over by the state in 2006.