Here we go again. The proposed transfer of $2.2 billion in risk from the Florida Hurricane Catastrophe Fund (CAT Fund) to the private reinsurance market is nothing more than corporate welfare and will lead to higher property-insurance rates.
The only beneficiaries would be the reinsurers themselves, mostly based in Bermuda. These are people who actually hope for catastrophes so that they can demand higher rates and larger profits.
Some damage has already been done. Just as private insurance companies are negotiating the reinsurance contracts, Fund Director Jack Nicholson is throwing them a lifeline. Just the threat of the CAT Fund sucking up a couple of billion in capacity helps the reinsurance negotiators keep rates higher — closer to the sky-high rates they’ve traditionally charged.
If the deal is approved, the reinsurers get to laugh all the way to the bank. For the reinsurers to be on the hook for full payment of claims, a storm would have to literally zig-zag the entire state hitting every major metropolitan area.
This proposal also subverts the constitutional role of the Florida Legislature. For the past several years, reinsurance lobbyists have tried to advance bills that would reduce the capacity of the Cat Fund. The Legislature has said No each time.
Fortunately, the proposal must be approved by Gov. Rick Scott, Chief Financial Officer Jeff Atwater and Attorney General Pam Bondi. They didn’t approve Nicholson’s proposal last year. They should shut him down this year, too.
If they clearly say No to the deal during next Tuesday’s Cabinet meeting, it will help Florida companies that still are in negotiations with reinsurers get better pricing so that policyholders get lower rates. After all, a corporate-welfare deal that raises property-insurance rates by even a dime is not just bad public policy, it would simply be shameful.
Frank Artiles, state representative, District 118, Florida House, Miami