Posts Tagged ‘Florida Hurricane Catastrophe Fund’

Florida Home Insurance Rate Increases – Can You Avoid Them?

January 3, 2010

Recent Florida Legislation signed into law by Governor Charlie Crist was a necessary step required to strengthen the stability of the Florida Property Insurance system.  Citizens Property Insurance will be allowed to raise Florida home insurance rates as 10% per year until the premiums they charge more closely reflect the risks the company is taking.  Private Florida home insurance companies will also be allowed to raise rates to cover the additional reinsurance they are expected to buy in the private market instead of from the Florida Hurricane Catastrophe Fund.

The bright spot is that the Florida insurance system will be on a much stronger financial footing in the coming years if the state can continue the limited hurricane activity it has enjoyed during the past few years – something that has to happen to improve the chances that most Florida home insurance companies can make good on their promise to pay your hurricane claim quickly and fairly.

The bad news is the fact that all of us will be facing up to a 10% increase in Florida homeowner insurance rates.  A rate increase of 10% might not sound like much of an increase in other states but in Florida the situation is much different.  These increases will be based on higher premiums already in effect after the major rate increases approved after the 2004/2005 Florida hurricanes.  Even before the coming 10% increase, consumers in Florida were already paying the highest home insurance rates in the country.

The rate increases could not be coming at a worse time.  To begin with, Florida is in the middle of a financial crisis just like the rest of the country with depressed real estate, bankruptcies, foreclosure, and increases in unemployment.  These rate increases are going to start happening at the exact same time that State Farm Florida will start cancelling up to 30,000 policies per month as they start exiting the Florida property insurance market.  Our subscribers who presently have their insurance with State Farm are telling us that finding comparable coverage with another Florida home insurance company may cost them up to 200% more after they lose their coverage with State Farm.

So what is the bottom line for you as a Florida homeowner insurance consumer as we move through this challenging period?

To start with, you have to understand that even though there are only 40 companies still writing new business, you still have a good chance of locating 5-10 companies from this group that may still be willing to cover your home – even if it is an older home or has close proximity to the coast.

It is very important for you to shop your Florida home insurance policy with more than one independent agent – someone who represents multiple Florida homeowner insurance companies looking for your business.  Contacting multiple independent agent will ensure that you are able to get quotes from all the companies in your county who want to cover your home – not just the Florida home insurance companies carried by a single agent.

Also, you have to do due diligence and research on all of the Florida homeowners insurance companies that you are getting quotes from.  The 40 companies still willing to write new business vary greatly in terms of their size, financial resources, insurance industry experience, and customer service history.  It is important that you ask your agent how each of the companies you are considering is performing in each of these areas.

As you come up with a short list of companies, work with several independent Florida insurance agents and make sure that you have received quotes from all the companies in your county that are interested in covering your home.  As you evaluate the quotes, don’t buy the Florida insurance for your home simply on price.  Find the right balance of financial stability, outstanding customer service, and the price of the policy.  After all, paying a low price for Florida home insurance isn’t really a bargain if the company you pick pays slowly and won’t pay the full amount that you need to repair the damage to your home after a Florida hurricane?

There is little doubt that these recently approved increases in Florida home insurance will be very difficult to swallow and the timing is very bad.  However, if you take the time to find all of the Florida home insurance companies that are interested in covering your home, you might be able to fight off all of the 10% increase while everyone else has to pay up.  Your research can save you thousands!


Michael Letcher is a Fortune 500 executive and a licensed Certified Public Accountant.  His on-line guide can help you find low cost insurance Florida.  Learn the secrets to affordable Florida insurance in his free newsletter at =>


Florida Home Mortgages – What Would Happen if Everyone Defaulted?

January 3, 2010

Most of us are not interested in talking about Florida homeowners insurance.  Even though the Florida property insurance market is still in a state of chaos, we would prefer to pay our bill and forget about insurance until the bill comes again in the mail next year.

So it’s no wonder that when a story ran in the Florida media earlier this year about two key financial rating agencies (A.M. Best and Demotech) threatening to downgrade the ratings of dozens of Florida homeowners insurance companies unless something was done about the Florida Hurricane Catastrophe Fund shortfall, no one paid any attention.

If these rating agencies follow through on their threat to downgrade Florida home insurance company ratings, the impact would be disastrous for all homeowners in the state.

Let’s start with a look at how this potentially lethal situation was created.

The Florida Hurricane Catastrophe Fund (Cat Fund) charges all Florida home insurance companies a premium for reinsurance – which is insurance for insurance companies.  It is a simply a mechanism that allows insurance companies to be reimbursed by the Cat Fund, once claims from a major Florida hurricane event exceed certain levels.

To address rapidly rising Florida homeowners insurance costs, the Florida Legislature passed laws in 2007 that increased the obligations of the Cat Fund by an additional $12 billion over previous levels.  That move made the Cat Fund directly responsible for up to $28 billion in losses and led to some modest reductions in Florida home insurance rates.

The change in the Cat Fund seemed like the right thing to do at the time, but there were problems with this approach.  The Cat Fund relies on the full faith and credit of the State of Florida to be able to issue bonds at reasonable interest rates to cover the cost of major storms.  That ability to borrow is what allows the Cat Fund to charge less for the reinsurance than insurance companies would have to pay in the private market for this coverage – and in theory at least would lead to lower insurance rates.

In perfectly functioning bond markets, this approach might have worked successfully for many years.  However, our current financial crisis has changed all of that.  Even the most credit worthy governments across the country cannot borrow all that they need from the bond markets.  The Florida Cat Fund is no exception.

As the Cat Fund looks at the $28 billion in exposure that it faces, it has publicly acknowledged a shortfall against that responsibility of an estimated $18 billion.

That shortfall means that it is very possible that after your Florida home insurance company satisfies its primary claim obligations after a hurricane, it can’t rely on the Florida Cat Fund to reimburse it for losses above those levels.  In plain English, that means that some Florida homeowners won’t have their hurricanes paid in a timely fashion.

So why are the financial rating agencies concerned about this shortfall?

When the rating agencies issue their ratings on Florida home insurance companies they know that both you and your bank rely on those ratings to help predict the financial ability of your insurance company to pay your claim promptly and satisfactorily.  These rating agencies factor into their ratings the quality of the reinsurance contracts among other things – regardless of whether those contracts are purchased in the private market or from state agencies like the Florida Cat Fund.

When the rating organizations assess the $18 billion shortfall in the Florida Cat Fund, they question the reliability of the reinsurance being provided and they know that there is an increased chance that the insurance company won’t be able to meet its obligations.  That is why they have threatened to downgrade the ratings of all the Florida home insurance companies that rely on the Cat Fund.

So what happens to you in May of 2009 if this downgrade happens?

You will face nothing short of a major disaster – even if you pay your mortgage in full every month.

Here is how this shocking scenario would play out if nothing is done to address this.

The Florida Legislature does not address the Florida Hurricane Catastrophe Fund shortfall in its current 2009 session.

AM Best and Demotech lower the ratings of all Florida homeowners insurance companies in May of 2009.

When your mortgage company or bank finds out about these rating downgrades, it will let you know right away that you need to find a new more highly rated insurance company or else you will be found to be in default under the provisions of your mortgage.

Because all the Florida home insurance companies are required to buy certain layers of reinsurance from the Cat Fund, you won’t be able to find even one company that will satisfy your Florida mortgage lender.

Your Florida mortgage company will take action to protect the lien that it has on your home by putting forced placement insurance coverage on your home at about 4 times the amount that you had been previously paying for your Florida homeowners insurance – so if the homeowners insurance that you had been buying from your company that had its ratings downgraded was $4,000, the bank will step in and buy a forced placement policy from a company of its choosing that is now going to cost you $16,000 per year!

And here’s the worst part.

You’ll pay four times more than the cost of your traditional Florida home insurance and you won’t recover any money for your home or personal effects if you have a major Florida hurricane claim.  Forced placement coverage only covers the unpaid balance of your mortgage and it will be paid directly to the bank, not you!

You will be financially on the hook for paying your bank the cost of that $16,000 a year policy every month until you are able to find a replacement Florida homeowners insurance company that has a rating that is acceptable to your mortgage company.

During this period of turmoil all Florida real estate transactions will come to a complete stop – which will further worsen the housing crisis in Florida.

This downgrade in the insurance company ratings is expected to happen by May 15, 2009 if the Florida Legislature does not adequately address the shortage in the Florida Cat Fund – with only two weeks remaining before the start of the 2009 hurricane season.

Unless you feel like $16,000 is pocket change to pay just to protect your lender’s interest in your property, now is a perfect time to let your Florida Legislators know that you want them to fix the mess that they created in 2007!


Michael Letcher is a corporate executive and a licensed Certified Public Accountant.  His on-line guide can help you find affordable Florida home owner insurance.  Get all the secrets to low cost Florida insurance in his free newsletter at =>

Florida Homeowners Insurance – Want to Pay Someone Else’s Bill?

January 3, 2010

Since Hurricane Andrew in 1992, Florida home insurance companies have continued to pull out of the state or seek significant rate increases.  Why?  Because the companies and state regulators can’t agree on the appropriate Florida homeowners insurance rates consumers should pay for the hurricane portion of their bill.

As a result, beginning in the 1990’s, Florida started to impose special assessments on every Florida homeowners insurance policy issued and created a state run insurance company of last resort that is called Citizens Property Insurance Corporation to ensure that everyone in Florida can get home insurance coverage for their home.

Florida also created The Florida Hurricane Catastrophe Fund which requires all licensed Florida homeowners insurance companies to buy reinsurance after the losses from a major hurricane reach a certain level.  This find serves as insurance for Florida home insurance companies and is designed to ensure that the companies don’t have to absorb all of the costs of a major hurricane event directly.

Finally, Florida created a legal entity called the Florida Insurance Guaranty Association (FIGA) that will pay your insurance claim if your Florida homeowners insurance company is declared insolvent.

Those special assessment line items on your Florida home insurance bill can cause you to pay line item charges for many years into the future.  You can be required to make up the difference when Citizens Property Insurance Florida and the Florida Hurricane Catastrophe Fund can’t meet their obligations.  Or you could be assessed for the difference if FIGA doesn’t have the cash to pay off the claims filed against a Florida homeowners insurance company that became insolvent.

So far, at high level, each of these various entities and the protections that they offer make sense.  And when they work properly they do help further diversify Florida’s hurricane risk and help make it attractive for Florida home insurance companies to continue to do business in the state.

However, the Florida Insurance Laws passed in 2007 and 2008 have altered and politicized the goals of each of these entities to a point where they no longer function as originally intended.  Why?  Because Florida legislators aren’t willing to tell voters the truth – that these entities are now seriously underfunded and not positioned to do what they are supposed to do.  Even worse, many Floridians don’t know that they are subsidizing the Florida home insurance premiums of someone else.

Presently, both the Florida Hurricane Catastrophe Fund and Citizens Insurance do not have enough money and are overly dependent on an unfriendly bond market to satisfy their responsibilities.  Both organizations have to borrow before Florida hurricanes happen with limited success to come up with the money they need – and they are coming up short in the bond markets as the country continues to work through the financial crisis.

Citizens Property Insurance Corporation is the one organization that causes each of us to subsidize the Florida insurance costs of someone else.  Every one of us will be required to pay annual special assessments for many years into the future to cover the cash shortfalls that Citizens Property Insurance had as a result of the 2004/2005 storms.  Cash shortfalls are just another way of saying that those who were insured with Citizens for the 2004/2005 storms, were simply not charged enough premium for that coverage.  Many of those homes are older homes that are located in areas of Florida that are the most susceptible to hurricanes.   After the Florida hurricanes of 2004/2005, Florida legislators decided to freeze the home insurance rates being charged by Citizens – a politically popular decision that also resulted in everyone in Florida subsidizing the homeowner insurance rates of others who live in the areas most vulnerable to hurricanes.

Last but not least, because the rates of Citizens have been frozen for the past few years, even when consumers can find Florida home insurance in the private market, they are still given the choice of being insured by Citizens and being undercharged for their insurance.

This subsidized insurance that many Citizen policyholders receive, comes at a price.  It is funded mainly through special assessments that all of us are required to pay on our Florida homeowners insurance bills each year.  These assessments have become so burdensome, that Florida home insurance policies are not enough to pay the total cost.  That’s why you’ll see many of them on your Florida auto and business insurance bills as well.

If you are fed up with paying the Florida homeowners insurance premiums of someone else, now is the time to have your voice heard during the current session of the Florida Legislature.  Tell the lawmakers that you’ve voted for and sent to Tallahassee that you want the Florida home insurance rates of Citizens Property Insurance Corporation raised to reflect the true cost of the homes they are covering.


Michael Letcher is a Fortune 500 executive and a licensed CPA.  His on-line buyers guide can help you find low cost Florida insurance.  Get the secrets to affordable Florida home insurance in his free newsletter at =>

State Farm Florida – Will it Exit the Florida Property Insurance Market?

January 2, 2010

For a long time, State Farm Insurance FL has been one of the few Fortune 500 home insurance companies still operating in Florida.  It remains by far the largest private company for both homes and autos with 1 million and 2.5 million policies respectively.

They should be commended for that.

After all, many big insurance companies simply left Florida for good after Hurricane Andrew – and never looked back.  That left Florida to deal with the problem on its own and caused it to create its own state run insurance company of last resort to help those who simply could not find coverage.

State Farm Florida Insurance Company did not follow this approach.

It has taken a prudent approach to the market that has been present in Florida since Hurricane Andrew.  These steps have included:

Strict underwriting criteria for homes selected for new business

Multiline discounts for policyholders with home, auto, and life coverage

Selectively cancelling higher risk older homes closer to the coastline

This approach might have been successful during normal, reasonable periods of history.  However, reasonable is not the right word to use for what has happened in Florida in recent years:

From 1992 to 2004, no large insurance companies re-entered the Florida property insurance market – leaving State Farm on its own.

Florida hurricane claims in 2004 and 2005 caused billions of dollars in damage.  State Farm Florida paid millions in claims and had to request an emergency cash infusion from its parent company to recapitalize it.

While the company received significant rate increases following the 2004/2005 hurricanes, large rate increases given to most Florida home insurance companies in 2005 and 2006 caused a major political backlash.  Quite honestly, the public demanded rate relief because Florida home insurance was simply not affordable.

The pressure for lower rates was far worse due to outrageous property taxes and the collapse of the Florida real estate market.

The State of Florida reacted to voter pressure.  However the final impact was not impressive.

Legislation passed in 2007 and 2008 had a limited effect in lowering home insurance rates while shifting billions of dollars in catastrophic hurricane risk to the Florida Hurricane Catastrophe Fund – a state entity that has publicly stated that it can’t meet its reinsurance obligation to insurance companies in part due to the frozen bond markets.

As a result, all companies including State Farm Insurance Florida are concerned that the Florida Cat Fund won’t be there to pay them back after a major hurricane and are looking for new sources of backup reinsurance.

That, combined with other factors led the company to request a 47% rate increase a few months ago.  After state regulators rejected the rate increase, the company appealed that decision in court.  Recently a judge agreed with state regulators that the State Farm Florida 47% rate increase was not justified and also rejected the rate increase.

This brings us to where we are today – a time when many Floridians have to be wondering if State Farm Insurance FL  is preparing to exit the state for good.  This would not be welcome news and would cause a major shock to the Florida property insurance market as policyholders scramble to find other coverage.

You have to be ready for the realities that come with today’s uncertain times.  One of those might be that your State Farm homeowners insurance policy in Florida will be cancelled or dropped.  If that happens there are several things you need to do to respond to this:

Shop your policy.  Most State Farm Florida agents can only offer you homeowners coverage with Citizens Property Insurance after your policy is cancelled.  Find a large independent agent who represents multiple companies in order to give you the best options for replacing State Farm Florida.

There are many new insurance companies local to Florida that have come into existence in the past 15 years, many of which have only been approved since the start of 2006.  Some of these companies might be a good option to replace State Farm but you have to research each and every one of them.  Review their financial ratings and their experience with customer service completely.

Insurance agents for State Farm Florida will be hurt by large cancellations of homeowners insurance policies.  They have spent years building a book of insurance business in Florida.  When they lose your home insurance business, it usually means they lose your car and life insurance business as well.  While you can’t help but be sympathetic, you need to know that it is in your agent’s self interest to keep your auto and life insurance business while putting your home insurance coverage into Citizens Property Insurance Corporation.  Don’t accept being placed with Citizens without looking for other private home insurance companies through other agents that can also offer you auto and life insurance.

Get all the facts if you are thinking about Citizens Property insurance.  Citizens has stated the premiums it charges are not high enough to cover the risks that the company takes.  It is also experiencing problems with borrowing to pay major hurricane claims in today’s shaky bond markets.  Major recommendations being presently considered at Citizens include raising rates, limiting coverage, and mandating certain home hardening measures.  Do your home work on Citizens just like you would for any other company.

While it is impossible to know how this drama with State Farm Insurance FL will conclude, by following these steps you’ll be way ahead of thousands of other policyholders who will all be scrambling to replace their coverage at the same time.


Michael Letcher is a former Fortune 500 executive with Bank of America and W.R. Grace and a licensed CPA.  His on-line buyers guide can help you if you are cancelled by State Farm Florida Insurance Company.  Get his free newsletter at =>

Will the State of Florida Collapse?

January 2, 2010

The State of Florida is facing the most serious crisis in its history.

With an estimated budget shortfall of $2.3 billion, the State of Florida is one of eight states where a deficit of over $1 billion is expected.  The budget shortfall is being blamed on everything from lower collections on documentary stamp taxes from a slumping real estate market to reduced sales taxes on the sale of automobiles.  Massive declines in tourism, consumer spending, and corporate earnings have all resulted in lower sales and corporate taxes.  And in particular, for the first time in decades there are fewer newcomers entering the state.

Florida property taxes are still very high.  Voters have seen little relief from Amendment 1 passed earlier this year.  While taxable home values have come down due to the collapse of the Florida real estate market, this has been more than offset by higher tax rates and an increase in taxes that are not based on the value of the home.  The net result is that Floridians still face staggering Florida Property tax bills – even in a depressed real estate market.

Florida homeowners insurance is still expensive and hard to find.  Legislation passed in 2007 put much of the risk of a major Florida hurricane on the backs of Florida taxpayers.  The Florida Hurricane Catastrophe Fund offered low cost reinsurance to insurance companies and assumed an additional $12 billion in risk.  Now the Cat fund says that it doesn’t have the borrowing capacity to meet its obligations – estimating a possible shortfall of up to $15 billion.

The State of Florida was so concerned about the inability of the Cat fund to raise money to cover a major hurricane earlier this year that it paid Warren Buffett’s Berkshire Hathaway Company $224 million.  In return, Buffett’s company guaranteed that the state would be able to raise $4 billion in bond debt if a major hurricane produced enough damage to trigger the Cat fund.

The situation at the state run insurance company in Florida – Citizens Property Insurance Corporation isn’t much better.  Citizens Property Insurance has some of the highest risk homes in Florida and doesn’t collect enough in premiums for the risk that it takes.  It has $433 billion of property exposure on its books with a $4 billion surplus on hand to pay claims.

Policyholders of Citizens face two issues.  First there is the risk that Citizens Property Insurance can’t meet its primary claim obligations for lower level storms because of its own trouble raising cash in the bond market.  Second, once losses reach a certain level, Citizens Insurance will look to the Cat fund for reimbursement after a series of major Florida storms – a fund that just might not have the cash needed by Citizens.

While all of these developments in Florida are serious, there is really nothing new about a government that doesn’t live within its means and takes on obligations that it doesn’t have the cash on hand to meet.

What is new and should send shockwaves across Florida is the fact that the state cannot borrow in today’s bond markets the way it has been able to in the past.  In effect, the State of Florida has maxed out its credit card.

Why is it so hard for states like Florida to borrow in the current bond markets?

Issuing bonds used to be easy for state and local governments.  It was a simple process and no one thought twice about it.  That’s changed since the failure of the subprime mortgage market.

Despite a very low bond default rate, it is very difficult to attract bond investors these days.  Companies that used to insure new bond issues have had their ratings downgraded.  That’s caused bonds to be less liquid and not attractive to investors.  And it makes states like Florida have to offer higher payments for interest and principal in order to sell out a bond issue.

With severe revenue shortages and a frozen bond market all Floridians should be demanding that the state keep tightening its belt.  That process has already started.  But you should anticipate strong opposition to spending cuts from those who think big government is good.

These groups will demand that Florida lawmakers increase taxes rather than making additional cuts in spending.  Don’t underestimate where this could lead.  Many items that are currently exempt from Florida sales tax could suddenly be taxable in this crisis environment.  Expanding the sales tax could lead to new taxes on everything from Internet sales to various types of consulting services.  All of which would dramatically increase our own cost of living and make it that much harder for Florida to emerge from this recession.

And never underestimate the risk of Florida legislators dealing the final death blow to the state – instituting a state income tax.

It is up to all of us to make sure that never happens!

If there is one lesson that all governments need to learn during the current financial crisis it is this – there is nothing wrong with the “pay as you go” system.  It will always stand the test of time no matter how shaky the bond markets are.


Michael Letcher is a former Bank of America and W.R. Grace executive and is a licensed CPA.  Floridians use his on line database to find other options to Citizens Property Insurance Corporation for their homeowners insurance in Florida.  Subscribe to his free newsletter and get the truth about Citizens Property Insurance Corporation by visiting =>

Florida Home Insurance – No Washington Bailout

January 1, 2010

The financial crisis continues to bring bad news.  Recently executives from General Motors, Ford, and Chrysler flew to Washington on their corporate jets to beg for their share of the $700 billion Troubled Asset Relief Program.

In a pathetic display of arrogance and entitlement, leaders of former “best in class” companies begged for billions of dollars with their tin cups outstretched in front of the US Congress.   Before the Big Three ever arrived in Washington, billions had already been committed to AIG and some of the largest financial institutions in the country.

During this financial meltdown we’re seeing something we never expected to see in our lives – broken promises from major corporations and government entities on a scale never considered possible.  We’ve reached a point where even large companies and large states like Florida can’t meet their obligations using the bond markets.

If you are a Florida home insurance consumer, your biggest asset is now at risk during the financial crisis – your Florida home.

Can you name a more sacred promise than the one a Florida home insurance company makes to you when it takes your money and agrees to insure your home?

When you buy homeowners insurance in Florida the insurance company is promising you fast and fair payment of your claim.  Florida insurance companies buy reinsurance to help them make good on this promise to you.  Reinsurance is backup coverage that insurance companies buy to help protect themselves from big losses above certain levels.

The Florida Hurricane Catastrophe Fund was formed as a way to help stabilize the Florida property insurance market after Hurricane Andrew caused billions in damage to Florida in 1992.  By offering reinsurance at affordable rates, the fund helped to make homeowners insurance available and affordable for many years.

That all changed after the Florida hurricanes of 2004 and 2005 when Florida home insurance became overpriced and hard to find again.

The Florida legislature responded to the Florida home insurance crisis by voting in 2007 to expand the reinsurance sold by the Cat Fund by $12 billion – raising its total risk to a total of $28 billion.  Florida home insurance companies were required to purchase this additional reinsurance from the state and to pass along the savings realized on reinsurance to home owners.

As a Florida homeowner, you didn’t get the rate reductions that this law was supposed to provide.  You didn’t get the 24% average rate reductions that were predicted when the legislation passed.  And to make things worse, the Florida Cat Fund took on an additional $12 billion in risk.

Now the Florida Catastrophe Fund has told us that the frozen bond markets won’t be an acceptable source to raise the cash it needs to meet its commitments to the insurance companies after a major Florida hurricane.  It recently estimated that it could pay out $13 billion over the next twelve months – That’s $15 billion less than the $28 billion it is on the hook to pay!

Where does this leave you as a Florida home insurance consumer?

You didn’t get the rate relief you expected and your state took on financial obligations that it has no hope of paying.

You are at risk if Florida experiences a major hurricane in the next year.  Once the losses of your Florida home insurance company exceed certain levels, your company will ask the Florida Cat Fund to reimburse them in order to pay your claim.  Since the Florida Cat Fund is short on cash, you might have a long delay in getting your claim paid.

The promise to pay your Florida home insurance claim has never been more at risk than it is today.

Now that you know that the Florida Hurricane Catastrophe Fund will not meet its obligations, let’s examine the National Catastrophe Fund idea that Florida has been bring up in Washington for years.  This National Cat fund would offer an additional layer of loss protection above and beyond the obligations of the Florida Cat Fund.

The theory is that a National Catastrophe Fund would be funded in part by insurance premiums paid by policyholders in states that are part of the fund.  A National Cat Fund would be a separate fund that would earn interest and grow during the years when there aren’t any claims.

Supporters claim that no taxpayer money would be needed to sustain a National Cat Fund.  History tells us there would be storms so large that federal tax dollars would have to be used to cover major losses.

And everyone knows that the federal government can’t keep its funds separate.  Just ask someone in Washington to show you the billions that are supposed to be in the Social Security Trust Fund.  You won’t be shown any cash – just a drawer full of T-Bills and IOU’s.

Now that the Big Three Auto makers and other spineless Fortune 500 companies have beaten Florida to the punch in Washington, it is very unlikely that a National Hurricane Catastrophe Fund will pass anytime soon.  Even President Elect Obama will shy away from any additional federal obligations as he faces all of the red ink in Washington today.   So don’t look to the federal government to make good on the promise that was made to pay your Florida home insurance claim.

Finally, Citizens Property Insurance Corporation has consistently reported that it doesn’t have anywhere near the money it needs to pay out the almost half a trillion dollars in hurricane exposure it after a major Florida hurricane.

A large hurricane would mean that Citizens can’t pay even its primary obligations – those that it must pay even before losses reach levels where Florida Hurricane Catastrophe Fund reinsurance kicks in.  And as a policyholder with Citizens, you are subject to paying higher special assessments after a major Florida hurricane than policyholders who have private homeowners insurance – special charges tacked on to your annual insurance bill.

In this new brave world where even governments can’t keep their promises here are some steps you should take as a Florida home insurance consumer right now:

Get a Florida wind inspection done and harden your home as much as possible.

Avoid Citizens Insurance Florida if you can.

Look for a home insurance company with strong financials and a small geographically dispersed policy base across both Florida and other states.  Fewer policyholders will mean faster payment of your claim.

Call in your insurance claim on the same day the Florida hurricane damages your home.  This will make it more likely that you will get paid before your insurance company looks to the Florida Cat fund for reimbursement.

Last but not least.  The fact that the Florida Cat Fund is short on money has not been lost on Florida home insurance companies.  They are being charged for reinsurance by an entity that has publicly stated that it can’t meet its obligations.  That means insurance companies are not getting what they paid for.

You should expect Florida home insurance companies to try to buy more of their reinsurance in the private market and not from the State of Florida in 2009.  And they will look to pass that cost through to you in the form of higher insurance rates.  If they don’t get the rate increases they need, your Florida home insurance policy might be cancelled.

As the Florida home insurance crisis continues, it has never been more important for you to stay on top of the Florida Property insurance market.  You never know when you might have to find a new Florida home insurance carrier.


Michael Letcher is a CPA and a former executive with Bank of America and W.R. Grace.  His buyer’s guide helps consumers like you to find affordable Florida home insurance quickly.  Get his free newsletter and pay close attention to anything that threatens the cost of your homeowners insurance in Florida by visiting =>