Insurance industry experts question Citizens

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has become the focus of concern as Florid a approaches anotherhurricane season. Though Citizens, the state’s insurer of last has increased its reserves in the past it would need to rais e money from other sources to cover the cost of a powerful storm striking a denselypopulatee area. Dennis Burke, vice presidenrt of state relations withthe , said Citizens might need to raiss billions of dollars quickly after a storm something he said would be very difficult in today’s stymied credit markets. “I’ m not sure how Florida could cover [damages] from a majofr storm,” Burke said.
Unlike larges private insurers that turn to reinsurance companiez to coverhuge losses, Citizens would have to use its own resourcesz and money from the Florida Hurricane Catastrophe Fund. But criticsw said the fund doesn’tg have enough in reserve to coveer the immediate needs Citizens would face following a big Burke said the problem coul worsen as largecompanies — the ones with reinsurancre coverage — cut back their Floridaa operations. This month, State Farm received approvall to withdraw from property insurancecoveragwe completely, with the restriction that it transfedr that business to other private companies and not Citizens.
To covef a shortfall, the Hurricanes Catastrophe Fund almost certainly would have to issue revenue But given liquidity problems in thefinanciapl markets, raising billions of dollars to cover potentiao losses could prove extremely difficult, industryt experts said. Don Brown, a former state representative who chaired the HousdInsurance Committee, distributed a paper on that He argued that Florida is one major storm away from severe financial problems, and would require emergency aid from the federapl government to cover its obligationx to the property owners it covers.
Brown said he sees a parallelp between the housing market before the crashj of 2007and Florida’s propertyt insurance market. “We have an extremely fragile insurancr systemin Florida,” Brown “We are one disaster away from devastation in our economy.” Florida’s exposurr to hurricane threats is huge. Stephen senior vice presidentwith Ltd., a reinsurance company, said the stat accounts for about a third of the global risk for hurricanee and thunderstorm damage. Given its exposure, othe experts said Florida needs a sounder basis for coverinits property.
Guy Marvin, president of the , said if privatee insurers could assess ratesx that representthe risk, they would remain active in the state. But he said the state’s offer of insurancr from Citizens, which has rates frozen at 2005 levels, has distorted the market. Stevse Pociask, president of the American Consumer Institute Centerr forCitizen Research, said Florida needs to begim a transition back to private market insurance. “We createdr a real problem in the market,” Pociask said. “We need to take it slow and start the transition back tothe market. When the governmenyt sets pricestoo low, othe r insurers will just leavee the market.
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