After nine straight years without a major hurricane, Florida’s catastrophic insurance fund is flush with cash to pay claims and the cost of backup reinsurance is cheaper than ever.
“Reinsurers are hungry for new business,” said Ash Williams, director of the state Board of Administration, which oversees the so-called CAT fund. “We’ve never had the stars line up in this way.”
Williams’ pitch to transfer up to $2.2 billion in hurricane risk to private reinsurers enjoys broad support from a diverse coalition of pro-business and pro-consumer groups such as the Florida Chamber of Commerce, Florida Consumer Action Network, James Madison Institute and Florida Wildlife Federation.
But when Williams sought approval Tuesday of a plan he said would protect Florida taxpayers, Gov. Rick Scott and two Cabinet members balked and said they want to approve any refinancing deal in advance.
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Their hesitancy reflects not just the amount of money that’s at stake, but the hyper-self consciousness of Cabinet members in the wake of the forced ouster of a top state police official with no public discussion.
The December ouster of Gerald Bailey has triggered accusations in court of Sunshine Law violations against Scott and the Cabinet, and Cabinet members have said they need to exercise greater oversight of all agencies under their control.
Insurers buy reinsurance as an extra layer of coverage to help them pay claims after a major storm or other catastrophe. In the CAT Fund’s case, the more private reinsurance it buys, the less taxpayers are on the hook to bail out the state to cover hurricane claims.
Williams did not specify just how much it will cost to buy $2.2 billion in reinsurance coverage. However, SBA spokesman Dennis MacKee said there will be no “net cost” because reinsurance is so cheap and any costs to policyholders would be offset from savings they have in no longer paying emergency assessments to cover claims from previous hurricanes.
The CAT fund eliminated a 1 percent emergency assessment on policies last year. Earlier this year the Office of insurance Regulation eliminated a 1.3 percent emergency assessment that was being charged by Citizens Property Insurance Corp., the state-backed insurer of last resort, to cover claims from the devastating series of storms in 2004 and 2005.
Joining Scott in slowing the reinsurance plan were two Cabinet members who oversee Williams, Attorney General Pam Bondi and Chief Financial Officer Jeff Atwater.
“I’d like to see numbers,” Atwater said. “So that there’s a comfort level to keep us informed.”
The third Cabinet member, Agriculture Commissioner Adam Putnam, is not a trustee who oversees the state’s investments and did not participate.
Williams said he had no problem with being kept on a short leash with his bosses’ go-slow approach.
“I have no interest in working without a net. That’s a career-shortening habit,” Williams told them.
Contact Steve Bousquet at email@example.com. Follow @stevebousquet.