Homeowners insurance rates may spike if new proposals are successful
Homeowners insurance rates in Florida are expected to increase in the coming months depending on the fate of two proposals concerning the Florida Hurricane Catastrophe Fund (Cat Fund). The Cat Fund was established to ensure that homeowners insurance claims could be paid in the case of a severe hurricane. Because Florida is prone to such natural disasters, the fund was considered a viable form of protection for both consumers and insurance companies. Two new proposals aims to shrink the Cat Fund significantly, however, which could have a strong impact on homeowners insurance rates throughout the state.
Proposals aim to shrink Cat Fund
The proposals, HB 1107 and SB 1262, aim to reduce the Cat Fund from $17 billion to $14 billion over the next three years. Some insurance analysts suggest that this could cause homeowners insurance premiums to rise by 7% over the same period. The implications of this potential increase are compounded by the fact that homeowners insurance rates continue to rise throughout the state, and are expected to do so even if the Cat Fund is left alone. This is partly due to actions being taken by the state’s Citizens Property Insurance and the fact that many insurers are looking to reduce their exposure to risk.
Cat Fund facing serious financial woes
Supporters of the proposal suggest that shrinking the Cat Fund is a financially logical move. Like Florida’s Citizens Property Insurance, the Cat Fund is faced with significant financial problems. The fund itself is meant to protect against the financial damage caused by natural disasters, but state officials claim it would be unable to do so. In the event of a major hurricane, the Cat Fund would actually be forced to borrow money from the federal government in order to carry out its duties.
Changes to the Cat Fund could make homeowners insurance unaffordable
Opponents of the proposals claim that shrinking the Cat Fund will lead to unnecessary homeowners insurance rate increases throughout the state. Some lawmakers argue that consumers are already facing significant rate increases because of the problems associated with Citizens Property Insurance and that introducing further rate increases could mean many people will not be able to afford their homeowners insurance coverage in the future.