Lawmakers consider new subsidies for the reinsurance industry
This year, the Florida Legislature will be considering several proposals that could have a major impact on windstorm insurance throughout the state. Lawmakers continue to grapple with a problematic insurance market, where many insurance companies are either looking to raise rates exponentially or abandon certain sectors entirely. Given the ongoing problems with the state’s Citizens Property Insurance organization, lawmakers are eager to address any issues that insurance companies may have, and may be turning to the reinsurance industry to do just that.
Florida insurance market shows signs of instability due to risk exposure
Florida lawmakers are currently considering proposals that would provide private reinsurance companies with large subsidies from the state government. Reinsurers have been showing only modest attention for the Florida market over the past several years due to the fact that large companies, like State Farm, have been abandoning the state since 2005. Since insurers began leaving the state, more than 2.5 million policies have been cancelled, with most consumers turning to Citizens Property Insurance in order to get the coverage they need. The state-run insurer is considered a risky investment for the reinsurance industry, and those that offer coverage to the state-run organization, as well as to private insurers, tend to charge higher rates than average.
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New subsidies could increase homeowners insurance rates
The state Senate has been debating a legislation that could raise the rates of homeowners insurance coverage by 10% on average. This legislation would also decrease the capacity of the Florida Hurricane Catastrophic Fund by $5 billion, creating major opportunities for the reinsurance industry to provide coverage to the state’s private insurance companies. Some lawmakers have expressed concern over the growing clout of the reinsurance industry, suggesting that these companies, most of whom are not staunchly regulated by U.S. law, could significantly raise rates for homeowners insurance coverage throughout the state.
Florida virtually disaster-free for seven years
Though Florida is considered a market that is prone to natural disasters, the state has not experiences a serious disaster over the last seven years. Several tropical storms and hurricanes have threatened the state over this time, but none have made any major impact on the state. Some lawmakers cite this fact as a reason not to provide the reinsurance industry with state subsidies, but others consider these subsidies as a good way to generate more economic activity for the sate.