Dear friend,

Nothing’s ever quite what it seems in Florida is it?

On the face of it the move to curb the bloated excess of the extended Cat fund in the wind-exposed state is laudable as, for a small increase in original premiums, it spreads risk off the Florida taxpayer and more onto the private reinsurance market.

But weren’t we forgetting something?

In a word. Citizens.

Check this out from the excellent bill analysis that comes with the legislation.

“However, about 42 percent of the liability of the FHCF is currently payable to Citizens Property Insurance Corporation (Citizens), the state-created property insurer. Therefore, about 42 percent of the bill’s reduction in potential liability to the FHCF would be shifted to Citizens. If Citizens incurs a deficit, it may also issue bonds funded by assessments levied on the same base of policies that are subject to assessment for the FHCF (subject to certain assessment amounts that must first be levied against Citizen’s policyholders)

Generally speaking, about 42 percent of the estimated savings in potential assessments by the FHCF would not be realized by Florida policyholders after accounting for the potential increased assessments by Citizens. Alternatively, Citizens may need to have a larger rate increase to account for the loss in FHCF coverage, when it begins charging actuarially sound rates on January 1, 2009”

Or in other words 42% of the taxpayers’ gain in lighter Cat loss burdens will be clawed back as it falls on the scantily-funded Citizens.

Easy come, easy go — out of one state scheme and into another!

(And I love that bit at the end about Citizens charging actuarially sound rates in 2009
– which Florida politican is ever going to commit electoral suicide with that one?)