Another hurricane season starts today, and so do the annual rituals. Floridians check their hurricane supplies and evacuation zones. The governor and state emergency officials offer assurances that they are prepared to respond to a major storm. And legislators and the insurance industry spin the fantasy that the solution to Florida's property insurance crisis is free market competition and drastically higher premiums.
It's been six years since Florida has been hit by a hurricane. It's been seven years since the devastating series of hurricanes in 2004 and 2005 ripped through the state. Yet the state still has not come up with a creative way to make property insurance more available and affordable. In fact, the goal appears to be to gouge homeowners with state-run Citizens Property Insurance Corp. on the faulty premise that somehow the private market will start functioning again. It is terribly unfair to homeowners already struggling to make ends meet, and it jeopardizes the recovery of the state's fragile housing market.
In fact, Citizens is in better financial shape heading into this hurricane season than it has been in the past. It has roughly $6 billion in available cash and the capability to pay about $11 billion in hurricane claims. It could borrow additional money and have enough to cover claims for a Hurricane Andrew-type storm, although assessments would be required afterward. That's significant progress for Citizens, which remains the largest property insurer in the state with more than 1.4 million policies.
Yet Citizens continues to seek to skirt state law that limits annual premium increases to 10 percent. It is considering charging significantly higher premiums for new customers, and it is insisting on higher levels of replacement costs for many homeowners. It also is reinspecting more than 200,000 homes to see if discounts for hurricane hardening efforts such as roof tie-downs and storm shutters are warranted. Actual fraud should be rooted out, but it is curious that more than seven out of 10 homes inspected have seen premiums increase and Citizens stands to take in more than $107 million in additional premiums.
The Citizens board meets in Tampa today to hear ideas about reducing its number of policies. It's a safe bet private insurers will argue that Citizens premiums should be even higher so the private market can better compete. But there is a limit to how much homeowners can bear, and some private insurers never will re-enter the state at any price.
Bolder ideas should be on the table, including the creation of a national catastrophe fund. Florida also should study a St. Petersburg group's proposal to establish a state fund that collects windstorm premiums in return for the private market covering everything else and assuming all Citizens policyholders.
In the meantime, prepare for another hurricane season and hope Florida's luck holds out.