Superstorm Sandy should spur reform of Citizens
Superstorm Sandy left behind vast devastation and a chilling reminder of the powerful destruction just one act of Mother Nature can exact on our nation. Sandy’s wrath left more than 100 people dead and 8 million more without power for weeks. Insured damages estimates continue to climb and are projected to top $20 billion, with total economic losses estimated to be $50 billion or more.
For Floridians, Sandy should be a wakeup call, reminding us that although hurricane season has come to an end, we must prepare for the next unavoidable storm or series of natural disasters which frequent our coastline. At present, questions remain unanswered regarding the viability of state-funded subsidies which Florida taxpayers rely on to cover damages in the event of a major storm. Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund are woefully underfunded state-run programs which lack the ability to protect Florida residents in the case of a natural disaster.
The current structure of Citizens requires any Florida insurance policyholder to help pay claim obligations beyond what the company and its reinsurer — the Cat Fund — currently have saved. While we may have just closed the book on the 2012 hurricane season, it would be irresponsible to not start looking toward and preparing for the 2013 season.
Should 2013 bring a storm to our shores, Floridians could be faced with enormous hurricane tax assessments to help cover Citizens policyholder claims. These crushing hurricane taxes would cripple businesses and families across our state.
Once considered the insurer of last resort, Citizens has burgeoned beyond its healthy size to insure one out of four homes in Florida. Some have suggested that Florida’s previous storm-free years have provided Citizens and the Cat Fund with a sizable cushion to rely upon, but good luck is not a sufficient plan for disaster recovery.
Lawmakers should work toward reducing the risk associated with these govern- ment entities and lessen the burden on Florida taxpayers. The meager reserves and capital Citizens and the Cat Fund have built up would not be enough to cover immense damage wrought by a storm such as Sandy, leaving all Florida homeowners, businesses, renters, charitable organizations, and automobile policyholders to pay the state’s debt.
Reforming Citizens and the Cat Fund will benefit our state financially and environmentally. In addition to Florida’s natural habitats, which are important to native wildlife and our robust tourism industry, Florida’s low-lying coastal areas include barrier islands and wetlands which are essential in providing natural wind and storm-surge buffers. Our distinctive coastline actually protects inland areas, helping reduce the number of storm-related insurance claims.
The actuarially unsound low rates currently offered by Citizens and the Cat Fund have incentivized reckless coastal development in our naturally-sensitive areas. Returning Citizens to its original role as an insurer of last resort and rightsizing the Cat Fund so that it can safely meet its obligations will ensure that Florida preserves critical coastline protections and has the ability to recover after a hurricane.