As the 2008 hurricane season comes to a close, Floridians can breathe easier.

Only Fay slammed the state -- albeit four times -- with her heavy rains. The 15 other named storms spared Florida.

But there may not be much relief in the form of lower insurance premiums.

Rates could actually edge higher because of higher back-up insurance costs.

The slowdown in the economy is crimping premium revenues as home sales dwindle and foreclosures continue to mount. Insurers and agents catering to businesses are seeing a slowdown as well because companies are downsizing. Consumers and business owners are looking to trim insurance costs, even if it means cutting back on some coverages.

While hurricane losses in Florida were minimal this year, 2008 was the fourth costliest hurricane season on record -- $21 billion in U.S.-insured damages, according to the ISO`s Property Claim Services.

''Reinsurers are citing higher catastrophe losses which will be the reason for higher reinsurance rates down the road and that will impact rates on primary insurance. We will be seeing higher premiums,'' says Robert Hartwig, chief economist for the Insurance Information Institute, an industry trade group.

Primary insurers buy reinsurance to cover a portion of the losses they might experience during a year. That way, they won't have to use all their surplus cash to pay claims. While insurers aren't allowed to recoup past losses in their rates, Florida does allow companies to include the cost of reinsurance. In 2006, surging reinsurance costs accounted for much of the jump seen in homeowners' rates that year.

Jim Massie, Florida counsel to the Reinsurance Association of America, says there will be even greater demand for reinsurance coverage since the drop in the financial markets has eroded the investment income for both reinsurers and primary insurers.

Investment income is the primary fuel of many insurers' surplus funds, since insurers typically pay out most of the premiums they take in for claims.

No doubt, the downturn in the economy will impact Florida's insurance market too.

''As people tighten their belts, they're looking for ways to cut their homeowners insurance costs,'' says Skip Boland, an agent for Florida Farm Bureau Insurance in Margate.

REPLACEMENT COSTS

With home values falling, Boland says, many homeowners are asking agents to recalculate the replacement cost on their homes so they aren't buying too much insurance coverage. Insurance should cover the cost to rebuild a home after a total loss, not its market value.

Pablo Conde, president of A&A Underwriters in West Miami-Dade, says he's still renewing and writing some new policies, based on referrals. However, commercial clients are asking him to search harder for lower rates.

''Everyone is looking for ways to cut premiums,'' he says.

Carriers providing workers comp, which covers medical care for workers injured on the job, are taking a hit too because of the economy. One company that writes mostly workers comp and commercial coverage laid off about 45 staff members recently.

Conde's revenue from writing workers compensation policies has slowed because businesses are laying off staffers or shutting down in some cases.

But the big concern for insurers, agents and lawmakers is that the Florida Hurricane Catastrophe Fund might not be able to raise all the money it would need to pay claims if a major hurricane hits the state and causes tens of billions of dollars in damage.

The CAT fund, which sells lower-cost backup insurance to insurers operating in Florida, has the capacity to sell up to $28 billion in reinsurance. It expects to finish the year with $6.3 billion in the bank.

The fund would issue debt in the credit markets to raise the rest of the money it might need.

CREDIT CRUNCH

That's the problem. CAT fund officials, as well as its financial advisors, say the fund wouldn't be able to raise much cash, given the current credit crunch that is making it more difficult for the most credit-worthy businesses to borrow money.

Last year, companies bought almost all the extra coverage the CAT fund provided because it was priced so cheaply.

With the expectation of higher rates in the private reinsurance market, it's likely Florida-based companies will continue to turn to the CAT fund for less expensive backup coverage.

The CAT fund was expanded in early 2007 to provide up to $28 billion in coverage for Florida insurers. Earlier this year, as worries grew about the fund's ability to sell bonds in a deteriorating credit market, there was a bill in the Florida Legislature to reduce the size of the CAT fund. But it didn't passed.

''The Legislature erred in not reducing the CAT fund this year,'' said Jeff Grady, president of the Florida Association of Independent Agents, a Tallahassee-based agent group.

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