New plan to keep insurers afloat increases risk of ‘hurricane tax’ for all Floridians

You could be on the hook for bailing out private insurance companies by paying higher rates thanks to a new plan unveiled by Florida’s Office of Insurance Regulation.

The plan calls for Citizens, the state’s insurer of last resort, to provide reinsurance to private providers in the event they face insolvency.

The move is a last resort to keep 27 private insurers facing potential rating downgrades and insolvency afloat until state lawmakers can pass more comprehensive reforms next year.

The policy will be in place through this hurricane season, which comes with some big risks.

William Norris has had to fork up three grand to help his working-class son keep his home after being hit by a rate hike of more than 50 percent on his property insurance.

Now they’re looking at state-backed Citizens to try and get a better rate.

“For somebody who’s making $30,000 a year in a $50,000 home, to have an $800 mortgage payment is a little excessive,” said Norris.

Norris isn’t alone.

Nearly one million Floridians have flocked to Citizens already.

Now the insurer of last resort is being asked to do something it’s never done before: Provide reinsurance to other insurance companies facing insolvency.

“And frankly that means the taxpayers of the State of Florida will guarantee the financial solvency of these companies,” said State Senator Jeff Brandes (R-St. Petersburg).

Brandes has worked for years in the Florida Legislature attempting to solve the state’s insurance crisis.

“This is the government’s attempt to socialize the risk and kind of choose the least of the bad options available,” said Brandes.

Citizens spokesperson Michael Peltier explained by Citizens acting as a stop-gap for private insurers, the company’s exposure increases.

If a big storm hits this season, it could cost all Floridians insurance.

“The risk that we may have to assess other Florida property owners to pay claims increases,” said Peltier.

That means you could see everything from your home, condo, renters… even your auto insurance go up, regardless of whether your home sustains any damage.

It happened after the 2004-2005 hurricane season.

All Florida policyholders were hit with a 1 percent ‘hurricane tax’ that lasted eight years.

Mark Friedlander with the Insurance Information Institute fears a repeat today would cost ratepayers exponentially more.

“It’s possible that insurers could pay double the amount of claims if they had the same level of losses back in ‘04 and ‘05,” said Friedlander.

And for those like Norris already facing record inflation and skyrocketing rates, the idea of footing the bill for other policyholders couldn’t come at a worse time.

“You know, we have our own tax levies that we need to be worried about. If I have to worry about yours, if I have to worry about anybody else’s, that’s a problem,” said Norris.

There are too many hypotheticals to factor in in order to predict how much a ‘hurricane tax’ would cost the average policyholder.

For now, Floridians will have to hope the state’s gamble pays off and we see another storm-free year.

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