May 31, 2008, 04:40 PM
Hurricane Jeb
Florida's ex-governor criticizes his state's hurricane insurance plan.
Florida Governor Charlie Crist didn't appreciate our coverage of his plan to socialize his state's disaster insurance market and put taxpayers on the hook for billions. Now his populist lunge has won him a more formidable foe in the Sunshine State: his predecessor as Governor, Jeb Bush.
The highly popular Mr. Bush doesn't make a habit of violating Ronald Reagan's Eleventh Commandment ("Thou Shalt Not Criticize Fellow Republicans"), but he's making an exception here. BestWeek, a trade publication of insurance rating firm A.M. Best, quotes Mr. Bush criticizing states that are crafting disaster insurance plans "that are as bad as the natural disasters themselves." Which states? "My beloved state of Florida has taken steps along that path." Ouch.
In January, Mr. Crist enthusiastically signed into law a measure to reduce the cost of hurricane insurance by largely abandoning the insurance market in favor of a guarantee that, whatever happens, Florida taxpayers will cover the tab. And what a tab it will be. Citizens Property and Casualty Insurance Corporation, a state-owned insurance company, has more than $434 billion of exposure and only $2 billion of reserves to pay claims, according to state Representative Dennis Ross, one of the cooler heads who didn't prevail in the legislative debate.
Mr. Ross outlines the financial downside in the Journal of the James Madison Institute. "As a result of the 2004-2005 storm seasons, private insurance companies paid out $39 billion to rebuild Florida. Now, if we encounter another storm cycle reminiscent of 2004 and 2005, it is our consumers and taxpayers who are left to pay these claims," writes Mr. Ross. "The total debt of the State is $22 billion. This debt accumulated during the course of Florida's more than 100-year history as a state and could, literally, double overnight with one storm."
Will the state really be able to squeeze enough cash out of taxpayers and lenders when disaster strikes? We'll know soon enough. Florida International University's International Hurricane Research Center publishes a list of the U.S. areas most vulnerable to hurricanes and, no surprise, three of the top five are in Florida.
Rather than spreading the financial risk across the world-wide private insurance market, Mr. Crist's plan seeks to concentrate the risk within the state of Florida, triggering enormous costs at the moment when Floridians may be least able to pay. Says former Governor Bush, "When the government assumes the risk of these catastrophic events, they are putting at risk the livelihoods and quality of life of the taxpayers and citizens they serve."
That's a storm warning Mr. Crist would do well to heed.
Florida's ex-governor criticizes his state's hurricane insurance plan.
Florida Governor Charlie Crist didn't appreciate our coverage of his plan to socialize his state's disaster insurance market and put taxpayers on the hook for billions. Now his populist lunge has won him a more formidable foe in the Sunshine State: his predecessor as Governor, Jeb Bush.
The highly popular Mr. Bush doesn't make a habit of violating Ronald Reagan's Eleventh Commandment ("Thou Shalt Not Criticize Fellow Republicans"), but he's making an exception here. BestWeek, a trade publication of insurance rating firm A.M. Best, quotes Mr. Bush criticizing states that are crafting disaster insurance plans "that are as bad as the natural disasters themselves." Which states? "My beloved state of Florida has taken steps along that path." Ouch.
In January, Mr. Crist enthusiastically signed into law a measure to reduce the cost of hurricane insurance by largely abandoning the insurance market in favor of a guarantee that, whatever happens, Florida taxpayers will cover the tab. And what a tab it will be. Citizens Property and Casualty Insurance Corporation, a state-owned insurance company, has more than $434 billion of exposure and only $2 billion of reserves to pay claims, according to state Representative Dennis Ross, one of the cooler heads who didn't prevail in the legislative debate.
Mr. Ross outlines the financial downside in the Journal of the James Madison Institute. "As a result of the 2004-2005 storm seasons, private insurance companies paid out $39 billion to rebuild Florida. Now, if we encounter another storm cycle reminiscent of 2004 and 2005, it is our consumers and taxpayers who are left to pay these claims," writes Mr. Ross. "The total debt of the State is $22 billion. This debt accumulated during the course of Florida's more than 100-year history as a state and could, literally, double overnight with one storm."
Will the state really be able to squeeze enough cash out of taxpayers and lenders when disaster strikes? We'll know soon enough. Florida International University's International Hurricane Research Center publishes a list of the U.S. areas most vulnerable to hurricanes and, no surprise, three of the top five are in Florida.
Rather than spreading the financial risk across the world-wide private insurance market, Mr. Crist's plan seeks to concentrate the risk within the state of Florida, triggering enormous costs at the moment when Floridians may be least able to pay. Says former Governor Bush, "When the government assumes the risk of these catastrophic events, they are putting at risk the livelihoods and quality of life of the taxpayers and citizens they serve."
That's a storm warning Mr. Crist would do well to heed.
