Opponents fear losing cushion

Opponents of the reform told the Judiciary Committee that they were concerned it would leave the CAT Fund with fewer reserves to pay claims if a catastrophic storm hits the state.

Gina Wilson, chief operating officer for the CAT Fund, warned that lowering the retention point would lead to more claims from insurance companies, which in turn would reduce the Fund’s reserves and make it more expensive for the Fund to borrow money to pay claims after a hurricane.

While insurers pay a third less cost for reinsurance they buy from the CAT Fund compared to private market reinsurers, the CAT Fund would likely be forced to increase its rates if the reforms are enacted “because we’ll be covering more risk,” Wilson said.

Brandes asked how flush the CAT Fund must become before its officials would be willing to reduce the retention point. That retention point has been steadily increasing for years — from $3.1 billion in 2003-05, as costs to insurers climb, the CAT Fund’s figures show.

Carolyn Johnson, director of business economic development at the Florida Chamber of Commerce, said the Chamber opposes the measure because a depleted CAT Fund would be allowed to levy surcharges on all Florida residents who buy insurance, including auto and home, to make up any claims-paying shortfall.

Before Thursday’s hearing, the Chamber sent emails to members of the Judiciary Committee warning that a yes a vote for the proposal would count against them twice when the Chamber hands out its annual legislative report cards.

In an interview, Johnson said said the Chamber has repeatedly opposed any CAT Fund changes that would increase risks of special post-event surcharges or assessments.