Florida Chief Financial Officer Tom Gallagher unveiled proposals today for state and federal action to strengthen the state's property insurance market and increase protections for homeowners and condominium associations after a hurricane hits.
Lawmakers at both levels must play a role in helping to ensure that homeowners and their insurers will be able to rebuild in the wake of a catastrophe, he said.
Mr. Gallagher warned, "Eight catastrophic storms in 15 months have caused more than $32 billion in insured damages, and Florida homeowners will bear the brunt of this burden if we don't act now to implement solutions to prevent an insurance market meltdown."
If adopted, Mr. Gallagher said his proposals could have national implications and some would require action in Congress.
Mr. Gallagher called on lawmakers in Washington to enact legislation introduced by Rep. Ginny Browne-Waite, R-Fla., to form a national catastrophe fund.
"Private insurance [in Florida] would not exist without the catastrophe fund," Mr. Gallagher said. Interest in creating a national system, he said, is increasing as lawmakers in other states realize that they too could be overwhelmed by a natural catastrophe. "This is an issue that is much bigger than just Florida," he said.
Congress should also pass legislation allowing for insurance companies to accumulate tax-deferred catastrophic reserves, and for the creation of catastrophe savings accounts that would enable homeowners to save money tax-free to pay insurance deductibles or other recovery costs
"Catastrophic savings accounts would give Floridians the opportunity to save money tax-free to pay insurance deductibles and uninsured losses, as well as to strengthen their homes against hurricanes," Mr. Gallagher said. "Money would grow over time to better protect Floridians from the financial threat of hurricanes."
At the state level, Mr. Gallagher called for the enactment of uniform building codes throughout the state, noting that homes built after the enactment of codes in the wake of Hurricane Andrew showed far less damage than those built previously.
"The past two years have proven that storms will strike anywhere," he said, making uniform, comprehensive building codes a necessity for the entire state.
Mr. Gallagher said that state lawmakers should also ensure that sales tax revenue collected from hurricane recovery is used to help offset assessments from the state catastrophe fund against homeowners and insurers, noting that lower assessments will better enable insurers to pay claims and keep their rates low.
Mr. Gallagher also called for a more aggressive push to move homeowners out of the state's insurer of last resort, the Citizens Property Insurance Corporation. "Citizen's was not designed to handle 600,000 homes," he said.
One solution, Mr. Gallagher said, would be to limit the coverage Citizen's offers to $1 million, forcing homeowners seeking higher coverage to move to the surplus lines market.
"Hurricanes are a way of life in Florida," Mr. Gallagher said. "Preparation, planning and leadership must be a way of life as well."
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