Newspaper article The Florida Times Union

Hurricane Loss Cap Causes Concern

Newspaper article The Florida Times Union

Hurricane Loss Cap Causes Concern

Article excerpt

Insurance Commissioner Bill Nelson's August proposal to cap home

insurers' hurricane losses at $10 billion has had a few weeks to

sink in by now.

And while Florida's property insurers continue to say they look

forward to working with the Insurance Department to flesh out

the details of such a plan, some concerns already are emerging.

These reservations likely will form the basis of negotiation

when the insurance industry and the Insurance Department sit

down to discuss the details of possible legislation for next

year.

To get some of the financial wherewithal to step in and cap

private insurers' homeowner claims in the wake of a Hurricane

Andrew-like storm, Nelson proposed to use several billion

dollars built up in the Florida Hurricane Catastrophe fund.

Under existing law, that fund created after the devastation of

the big 1992 storm would begin to pay out if the industry's

losses exceeded about $3.1 billion.

Many smaller insurance companies worry that replacing the

catastrophe fund with a $10 billion cap would weaken their

position, said Steve Liner of the Alliance of American Insurers,

a trade association with an office in Tallahassee.

"A catastrophic loss to them [small insurers] would be much

less than $10 billion," he said.

In comparison, big companies such as State Farm Insurance Cos.

and Allstate Insurance Co. have the financial resources to

absorb their share of storm damage that causes, say, $8 billion

in damage.

With many of the bigger companies limiting their growth in

Florida, the effect might be to discourage smaller companies

from doing business in the state, Liner said.

Potentially, this could have the effect of making insurance

harder -- not easier -- to get.

Then, as part of his cap proposal, Nelson wants to eliminate

the state-created Florida Residential Property & Casualty Joint

Underwriting Association and dramatically reduce the Florida

Windstorm Underwriting Association. …

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