State's CFO pushes issue, hoping it could ease insurance woes

A federal catastrophe fund that would help stabilize Florida's reeling insurance market could be on the horizon, the state's top financial officer said Thursday.

Florida Chief Financial Officer Adelaide "Alex" Sink, a Democrat elected in 2006, said she recently visited Washington, D.C., and spoke with members of Congress on the issue.

At this point, it seems the House of Representatives is more willing than the Senate to set up the fund, she said.

"There's supposed to be hearings on it next month. I think we'll get some movement in the House," Sink said, addressing about 140 people at a
Melbourne-Palm Bay Area Chamber of Commerce breakfast meeting at the Crowne Plaza hotel.

"The Senate will be the sticking point," she added.

However, Sink said she remains hopeful.

"It's not going to happen tomorrow," she said. "But, in the next 24 months, we may have it."

Such a fund would be used to set aside money to help pay insurance claims from hurricanes and other natural disasters -- seen as a partial remedy to a scarcity of property insurance and skyrocketing premiums in Florida since the hurricanes of 2004 and 2005.

Details haven't been settled on how the national fund would work.

One approach is that it would be funded through insurance premiums, and would help in the event of major hurricanes,
tornadoes, earthquakes, floods and other such natural disasters.

Opponents have argued that taxpayers or policyholders in places not vulnerable to hurricanes and other disasters should not have to contribute to a fund that would primarily benefit those in disaster-prone areas.

Sink, however, described it as people helping others in times of need, citing the billions of dollars in federal aid that has gone to Louisiana since Hurricane Katrina struck in 2005.

"It's the American way," she said. "When bad things happen, we all pull together."

Long shot?

Establishing a national catastrophe fund could be a long shot, said Gary Landry, vice president of the Florida Insurance Council, which represents the state's insurance industry.

"Primarily, what we see is it's going to be a hard sell in Congress," Landry said. "Citizens in Iowa don't want to pay for hurricanes in Florida, just like people in Florida don't want to pay for earthquakes in California."

Landry noted that Florida already has a state catastrophe fund, which insurance companies can draw from to help pay claims from hurricanes and other disasters.

Insurance companies pay into the fund, although the money comes from policyholders' premiums.

The Florida Insurance Council has no official position on a federal catastrophe fund, Landry said.

He questioned how effective it would be in Florida, because the state already has its own catastrophe fund, and a federal fund could have such a high activation point -- possibly $50 billion in losses -- that it would be rarely used.

"What helps Florida's insurance market is an adequate premium base for the risk," Landry added.

Relief welcomed

However, insurance rate relief would be welcomed by many locally.

Like many homeowners, some businesses are having trouble getting and affording property insurance, and some have backed out of buying commercial property because of it, said Jack Ryals, a member of the chamber's board of directors.

"Insurance can kill a deal," Ryals said.

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