Americans for Smart Natural Catastrophe Policy coalition today highlighted USA Today’s editorial as part of a growing chorus of newspapers that are defending the American taxpayer against the State of Florida’s strategy to seek federal funding for a bailout due to its mismanaged hurricane fund.
The USA Today Editorial (4/21/09) has the headlined, “In bailout nation, Florida takes its place in line. State’s undercapitalized hurricane fund threatens taxpayers everywhere.” It wisely states that the State of Florida is positioning itself for the federal government to bailout homeowners in Florida due to a basing the assumptions of their state hurricane fund on political pragmatism instead of economic reality: “While many states are in financial difficulty, Florida is in a uniquely precarious condition for another reason: its weather. Unwilling to accept the judgment of private insurers on the state’s vulnerability to hurricanes, Tallahassee has taken over much of the state’s homeowners’ insurance business, charging rates that are politically convenient rather than actuarially sound.” (http://blogs.usatoday.com/oped/2009/04/our-view-on-paying-for-disasters-in-bailout-nation-florida-takes-its-place-in-line.html)
The piece continues by describing that if a large hurricane hit the State of Florida, it would not be able to pay for it: “A single storm as bad or worse than 1992′s Hurricane Andrew, or a string of lesser ones, could well mean financial catastrophe for the state. Its Hurricane Catastrophe Fund , which currently has access to about $15.5 billion, would be wiped out. The state would have a hard time borrowing money and would still be liable for future hurricane damage.”
In addition, the Chicago Tribune editorial (2/14/09) “Florida’s Realities”came to the same conclusion: “Pretty soon Florida is going to have just one giant money-losing insurance company insuring homeowners—and they might as well rename it Taxpayers Property Insurance Corp. because that’s who’s going to foot the bill. Florida has a storm rising, but it has more to do with politics than hurricanes”.(http://www.chicagotribune.com/news/opinion/chi-0214edit2feb14,0,4194243.story)
And the Wall Street Journal editorial ( 2/04/09) adds “Florida’s Unnatural Disaster” adds, “Some 25% of the coastal property in U.S. hurricane zones is located in Florida, and another storm is inevitable. To pay for those claims when they come, Mr. Crist will either have to raise taxes on Floridians, or beg Congress for a rescue. Mr. Crist tried the latter in 2007 when he pushed federal legislation to distribute below-market loans to state insurance programs and create a federal reinsurance body to backstop undercapitalized states.” (http://online.wsj.com/article/SB123371173559046209.html)
The USA Today Editorial wisely warns that Florida is ready to complain that they DESERVE a bailout: “It’s not hard to envisage the argument Florida would make: How could you bail out Wall Street, and Detroit, but not us? Look at all the money that has flowed into New Orleans. What about us?…. Except that Florida’s problem is something that Floridians should be solving for themselves right now, painful though their choices might be.
The editorial concludes by providing the only real sound way forward: a financial and mitigation solution: “Florida needs to get its homeowners insurance business back into private hands and back onto an actuarially sound footing……As homeowners’ premiums go up, they force communities to rethink where and how structures should be built…..Until Florida revamps its insurance program, the state will be not only a meteorological disaster waiting to happen but also a financial one.”
About Americans for Smart Natural Catastrophe Policy American for Smart Natural Catastrophe Policy is a national coalition made up of a diverse set of voices united to support environmentally-responsible, fiscally-sound approaches that promote public safety. The Coalition strongly opposes legislative proposals that encourage people to build homes in hurricane-prone, environmentally-sensitive areas by creating new programs that directly or indirectly subsidize their homeowner’s insurance.