In My Opinion | Fred Grimm

Fred Grimm: Our disasters should be subsidized

The high living, free spending, hard partying gang running Citizens Property Insurance Corp. must rank as the least-loved outfit in Florida. Other than the Miami Marlins.

There’s much not to love. Last month, the Florida Office of Insurance Regulation reported that even while the pseudo-public insurer was raising rates and jettisoning policy holders like Kardashians discarding husbands, Citizens was frittering away money.

Some $10,000 a month was wasted on rent for empty office space. Citizens couldn’t be bothered with negotiating better deals with its vendors. And Citizens executives spent lavishly on travel, as if the expense account guidelines for public servants were written for a peon underclass. Some chump homeowner seething over a 10.8 percent pop in the cost of windstorm coverage might not take kindly to Citizens execs yukking it up at a $600-a-night resort in Bermuda.

And then there was that report from Citizens’ own Office of Corporate Integrity, describing a boys-gone-wild atmosphere (with exorbitant severance packages for boys who went too far). The report told of the night Citizens staffers gathered at the Coyote Ugly bar in Tampa, exhibiting: “…a boisterous drinking environment. Women are encouraged to dance on the bar, remove their bras, and in some instances, hang their bras from the rafters.”

Braless bar-top dancing in Tampa and luxurious nights in Bermuda haven’t created the public relations image likely to bolster Citizens’s request for yet another rate increase. But an awful truth looms over Florida’s windstorm insurance crisis. A coalition of teetotaling ascetics with Wharton MBAs couldn’t stave off the coming financial disaster.

Policy holders rage that even while Citizens and its party boy managers are jacking up individual premiums, using a bogus “reinspection” program, they’re sitting on a $15 billion portfolio. It’s not enough. The so-called insurer of last resort is stuck with 1.45 million of the most hurricane vulnerable properties in the most hurricane vulnerable state. One or two biggie storms wash ashore and Citizens’ $15 billion gets blown to oblivion. Along with the shaky few private insurers still writing windstorm policies. Florida has invested about $2 trillion in the very places most likely to be smashed — along the coastline. The closer to the water, the ritzier the properties. Eight of the nation’s ten most costly hurricanes have already banged across our shores. We’ve been lucky these last seven hurricane seasons, but history says that whatever we’re paying for insurance coverage, it’s not enough.

We need a little help from our friends. We need middle Americans in Nebraska and Utah and Minnesota and West Virginia and other inland places to contribute to a national catastrophic insurance fund. “It’ll be like the federal government-backed flood insurance,” we’ll tell them. But we won’t mention that since 1978, Florida, Louisiana and the other Gulf coast states have sucked up $28 billion of the $38 billion the flood program has paid out to policy holders. Or that was paid after hurricane-related flooding.

And we should avoid mentioning that owners of 8,300 of the properties covered by federal flood insurance have made multiple claims. They were flooded. They collected. They were flooded again. They collected again. And again. It’s a mad, mindless business practice, maybe, but it’s just the kind of permissive, build-and-rebuild-in-harms-way, insurance insanity we’re going to need in the way of storm coverage for modest little places like Miami Beach.

Obviously, if we’re going to convince the heartland to subsidize our seaside living, we’ve got to convince the folks out there that a national catastrophic insurance program would cover more than the occasional hurricane. Hey, we’ll cover their piddling catastrophes too. We might need to remind residents of the Midwest that Joplin, Missouri has been hit with four devastating 7.0 earthquakes in just a two-year period. Of course, those four quakes occurred two centuries ago, but still.

We’ll include earthquakes, tornados, wildfires. We’ll toss in blizzards, hail storms, riots, terrorist attacks, unexpected visits from the in-laws. We’ve just got to discourage folks from the hinterlands from doing any actual risk assessment. We don’t want them to know about the Insurance Information Institute report finding that from 1991 to 2010, hurricanes and tropical storms accounted for 44 percent of total catastrophe losses in the U.S., followed by tornado losses at 30 percent. Other catastrophes included winter storms at 7.4 percent, terrorism at 6.8 percent, earthquakes at 5.1 percent, wind, hail and flood losses at 4.1 percent and fire at 2.2 percent. Folks running wild in the streets, a category the insurance industry files under civil disorder, accounted for less than one percent of the insured losses.

In the low-lying Netherlands, the national government covers commercial and residential flood losses under the Calamities Compensation Act. The Dutch rationalize the coverage because 70 percent of the national GNP is generated from business properties situated below sea level. Hey, we can remind folks that most of Florida’s money is stacked along the beaches. They just need to think of high-rise beachfront luxury condos as money factories. Still, that argument might not be enough.

But the devastation suffered in New York and New Jersey from Super Storm Sandy brought some new allies into the argument for a national catastrophe fund. (We came close even without much support from the northeast back in 2007, when a national catastrophic insurance measure introduced by U.S. Rep. Ron Klein — of Florida of course — passed the U.S. House of Representatives but languished in the Senate.)

Still, we’ll need support from landlocked places where the locals regard Florida and New York as bastions of hedonism deserving of Cat 5 divine retribution. We just need to re-define “catastrophe” to reflect certain peculiar regional views of just what entails a disaster. We could include insurance coverage in case of an assault weapon ban. We can pay off if the WWE cancels WrestleMania, if the UN invades Nashville, if the New York Jets win the Super Bowl, if Rush Limbaugh embraces the science behind global warming, if either a secret Muslim from Kenya or Michael Bloomberg is elected president, if Danica wins the Daytona, if Makers Mark waters down its whiskey, if Michele Bachmann runs off with Sean Penn or, if Mitt Romney busts loose with the Harlem Shake.

Any ol’ catastrophe will do. We’ve just got to spread the risk. Preferably, before the beginning of the 2013 cyclone season. Florida, dangling like an empty windsock over hurricane alley, needs all the sucker-money it can muster.

Read more Fred Grimm stories from the Miami Herald

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