Collected to help pay claims from the 2004 and 2005 hurricane seasons, an extra charge on homeowners- and auto-insurance policies will be removed 18 months earlier than expected.
The 1.3 percent charge, added to most property and casualty lines, covers losses incurred by the Florida Hurricane Catastrophe Fund from those storm-filled seasons. Gov. Rick Scott and the Florida Cabinet this week moved up the end date of the “assessment” to Jan. 1, 2015, from July 1, 2016.
“It’s a positive thing,” said Jack Nicholson, executive director of the Florida Hurricane Catastrophe Fund. “People refer to this as a hurricane tax, and it will go away.”
The change was welcomed by the business and insurance community in Tallahassee.
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“It means rates are going down a little bit, which is a good thing,” said Sam Miller, executive vice president of the Florida Insurance Council.
The charge, which first appeared at 1 percent in 2007 and was increased to the current rate in 2011, collectively hits policyholders for between $350 million and $500 million a year.
The charge is imposed on most property and casualty policies other than medical malpractice and workers compensation.
Nicholson said the fund, which provides backup coverage for insurers, was able to move up the end of the collection in part by settling the final claims for damages from Hurricane Wilma, which hit South Florida in October 2005, for $498 million less than what was initially sought.
Also, more money than expected has flowed into the fund due to an increase in the number of policies statewide, he said.
Such a fee could return if the state is again hit by a large storm that depletes the fund’s resources.
The catastrophe fund, better known as the “cat fund,” currently has about $13 billion, and is expected to be able to raise an additional $4 billion, which is considered a solid amount to cover most post-storm claims.
The state was hit by eight hurricanes in 2004 and 2005, which accounted for about $9.2 billion in cat fund claims. No hurricane has made landfall in Florida since those highly active seasons.
In addition to the cat fund assessments, customers of the state-run Citizens Property Insurance Corp. are charged an additional 1 percent to cover losses from the 2005 storms. That charge, imposed in 2007, is expected to continue until June 2017.