BACKGROUND:
A contingent of lawmakers has pushed for reducing the overall coverage of the Florida Hurricane Catastrophe Fund, or Cat Fund. The fund acts as Florida's state-backed reinsurance fund, or the fund that pays out insurers in the event of a storm or hurricane large enough to trigger reinsurance claims. Some lawmakers think the fund would not be able to provide its maximum $17 billion coverage after a cataclysmic hurricane. Studies show the fund has a potential $1.7 billion shortfall if a large-enough storm were to hit the state, but that’s down from $3.2 billion in 2012. The fund has more than $8 billion in reserves but would have to borrow money from the bond markets if those resources were exhausted.
2013 PRE-SESSION OUTLOOK:
A phased-in reduction of the Cat Fund coverage was stripped out of a comprehensive property insurance bill being developed in the Senate before the legislative session began, but provisions allowing private companies to recover the cost of more expensive private reinsurance were included. Despite the push to reduce the Cat Fund, coastal lawmakers have resisted those efforts, fearing insurance companies will pass on more expensive reinsurance in the private market on to homeowners.
CURRENT SITUATION:
UPDATE April 2, 2013: Sen. Alan Hays, R-Umatilla, sponsor of SB 1262, couldn't fend off Ring's amendment and decided to temporarily postpone the bill in the Senate Banking and Insurance Committee. The move puts the bill in serious jeopardy in the upper chamber. Although Hays attempted to lessen the impact of the reduction of the Cat Fund coverage, lowering it only $1 billion to a total of $16 billion in coverage, but the panel voted 7-5 in favor of Ring's amendment.
UPDATE March 28, 2013: HB 1107 passed through the House Insurance and Banking Subcommittee unanimously, but the measure has been stalled in the Senate.
UPDATE March 21, 2013: Reinsurance companies and large companies are backing a separate bill (SB 1262 and HB 1107) that aims to reduce the Cat Fund’s coverage by $3 billion over three years. Small, Florida-based companies support a completely opposite approach from Sen. Jeremy Ring, D-Margate, which would decrease the deductible for small companies in the Cat Fund from $7.5 billion to $5 billion. The bills have been workshopped in both the House and Senate but have not received a vote.
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