Given the task force's broad mandate, it examined all areas affected by hurricanes and in a 58-page report submitted to the legislature set out a comprehensive set of recommendations covering topics such as the Cat Fund, Citizens, the state's building code, and the drive to mitigate homes to better withstand wind damage. Much of the task force's report is expected to be the basis for homeowners' bills currently being drafted by the House and Senate.

The Cat Fund

The task force's report clearly delineates between the regulatory action the state can take to directly influence the market and other goals regulators support without having the ability to unilaterally implement them. Take for example, Chief Financial Officer Tom Gallagher's call for the U.S. Congress to establish a national catastrophe insurance plan, much along the lines of Florida's Cat Fund. As Gallagher sees it, there is more than enough reason to create a national plan. “Just this past week we have seen tornadoes in the Midwest, wildfires in Texas, and levees and dam breaks caused by heavy flood rains in California and Hawaii,” he said. “With 115 major disaster declarations in more than 30 different states over the past two years, we as a nation need to share the cost of preparedness for catastrophes.”

The recognition that there is a need for a federal financial backstop for catastrophe is gaining support, especially after Hurricane Katrina made large portions of New Orleans uninhabitable. The National Association of Insurance Commissioners and the National Council of Insurance Legislature are helping to lead the fight for the catastrophe fund in Washington, D.C. Even so, the idea has long languished in Congress, primarily because the number of states relatively free from natural disasters is not inclined to pay for damage in other states. Also, the prevailing wisdom is that money can always be appropriated after the fact as seen in the case of Hurricane Katrina. Therefore, Gallagher and the state legislature can do little more than express their support for the national fund by passing a resolution. The same holds true with Gallagher's call for the creation of Catastrophe Savings Accounts, which would allow homeowners to accumulate money tax-free to pay deductibles and other hurricane-related expenses. Like the national catastrophe fund, the savings accounts would require an act of Congress.

Even as Gallagher turns his attention toward national issues, he has closely monitored the work of the task force. The task force's reach has extended to every topic associated with the state's ability to withstand hurricanes. And the news from the task force is both good and bad. According to the task force's report, much good has been done since Hurricane Andrew turned upside down the state's approach to hurricane preparedness. However, the last several years have taken their toll and once again the state is having to re-evaluate its ability to respond to the challenges brought about by a major hurricane.

Take for example the status of Florida's Cat Fund. As stated in the task force's report, the fund suffered losses of $3.85 billion in 2004 and $2.6 billion in 2005. Those figures, however, are likely to increase depending on the final resolution of the claims. As a result, the Cat Fund's resources will be exhausted and any 2006 losses will in all probability require the fund to issue revenue bonds to reimburse carriers. Based on these factors, Insurance Commissioner Kevin McCarty said he supported a task force recommendation calling for a rapid buildup in the Cat Fund by establishing an additional premium factor. Even though it could slightly increase policyholders' rates, the rate hikes would be far less than a post-hurricane assessment.

McCarty also called on lawmakers to pass a constitutional amendment to prevent lawmakers from raiding the Cat Fund to pay for other projects. Lawmakers have debated the amendment in the last several years, but so far there has not been the widespread support necessary to enact the measure. “We continue to support a measure that would keep the Cat Fund locked up so that the money can only be used for hurricane losses,” said McCarty.

In addition to augmenting the fiscal resources of the Cat fund, the task force also issued a number of other recommendations designed to give regulators and insurers greater flexibility to respond to market conditions. The recommendations are as follows:

In order to reduce the frictional costs associated with complying with regulations and encourage new capital in the state, the legislature should authorize the Office of Insurance Regulation to establish a streamline rate filing process, publish a reasonable competitive rate of return model for investors, and publish a trend factor for use in rate filings.

A streamline rate filing process should be implemented that allows insurers to use a manual rate that is actuarially derived for properties valued over $1 million dollars to stimulate competition with surplus lines carriers.

Implement a competitive rating structure for homes with a structural value of over $1 million while limiting the eligibility for the homes to be covered in Citizens.

Steps need to be taken to determine whether sinkholes are uninsurable in the private market. The Senate Banking and Insurance Committee is also studying the feasibility of implementing an alternative dispute resolution that would relieve an insurer of paying an attorney's fee award in a subsequent lawsuit if the insurer agrees to the recommendation of a neutral geologist or engineer.

Mitigation

If there is one subject that there is widespread agreement on it is the need to aggressively pursue means to build better homes and retrofit existing older homes so they can withstand the punishing winds from a hurricane. Leslie Chapman-Henderson, president and CEO of the Federal Alliance for Safe Homes, said that if Florida had learned anything since Hurricane Andrew it is that building codes and advanced construction techniques are crucial to protecting lives and property. “With respect to Florida since 1992, the one silver lining is that we started recognizing the value of hardening homes,” she said. “There is no real debate anymore that mitigation works.”

Chapman-Henderson placed a large amount of the credit for the improved homes on the statewide building codes, which were implemented in the late 1990s. The Florida Building Code is based primary on the American Society of Civil Engineers Standard 7, which is used for evaluating the ability of a structure to withstand certain risks. The Florida Building Commission used the standards when it established wind-born debris regions around the state. Based on geographic data and other information, the building commission identified the areas where buildings must be capable of withstanding 120-mph winds. Among other things, the buildings must have special window and door protection.

All of Monroe, Miami-Dade, Broward, Lee, and Pinellas counties have been declared wind-born debris regions. And the ASCE 7-Standards has been used to set the other regions in counties around the state. The only exception is in the Florida Panhandle. In 2000, the legislature limited the wind-born debris region between Appalachee Bay and the Alabama state line to one mile inland. In the wake of the 2004 and 2005 hurricane season, the task force is recommending the Panhandle exemption be eliminated. Other task force recommendations are as follows:

Establish a mitigation public awareness education campaign to educate consumers on the importance of mitigation and the resources available to assist in making their homes safer.

Create a mitigation consumer advocate officer to submit annual reports to the legislature on the state of mitigation funding and the effectiveness of the programs.

Encourage local governments to provide property tax credits or rebates if the homeowner takes steps to protect their property from hurricane damage.

Implement a pilot project that would require Florida-licensed contractors, or building inspectors, to provide a checklist for use in real estate transactions, which would disclose the existence or absence of mitigation features.

For his part, Gov. Jeb Bush is putting his money where his mouth is. In his State of the State address, the governor spoke at some length about how the state needs to be better prepared for hurricanes. “Our disaster response is the most effective in America and serves as a national model. But we can, and must, do more to make the best in the country even better,” he said. “Every Floridian must accept hurricane preparation as a personal responsibility and their government must make it a top priority.”

In his fiscal year 2006-2007, Bush is proposing the following appropriations for hurricane preparedness:

$69.8 million to build county emergency operational centers that can withstand at least a Category 3 hurricane.

$50 million to retrofit older homes to make them more resistant to hurricane damage.

$29 million to improve evacuation plans and $6.5 million to improve logistics operations.

$30 million to permanently install generators in every one of Florida's special needs shelters that care for sick and elderly individuals.

$12 million to increase the size and number of shelters to hold an additional 100,000 individuals. In the 2006 season, the state's shelters will be able to serve over 800,000 individuals, which is seven times more the capacity availability in 1999.

$5.3 million to launch a public information campaign to promote a “cultural preparedness.”

$302 million for affordable housing in those communities impacted the hardest by the 2004 and 2005 hurricanes.

A 12-day sales tax holiday held each May to coincide with the National Hurricane Awareness Week. The sales tax exemption will apply to all supplies associated with hurricane preparedness.