TALLAHASSEE, Fla. (CBSMiami.com/NSF) – Florida Governor Rick Scott may shrink the Florida Catastrophe Fund by roughly $5 billion over the next four years, according to the News Service of Florida.
The fund, paid for by insurers, is a re-insurance fund for insurance companies when a catastrophe hits and the insurers can’t pay their claims.
According to the NSF, the state fund’s capacity is currently at $17 billion, but new plans would shrink that amount to $12 billion and shift the liability to private insurers.
The fund is $3.2 billion short in its ability to pay obligations due to the global recession.
State insurance officials said an examination of the fund said that if the fund had to be fully tapped with the current market state, seven out of the eleven major insurance carriers in the state could become insolvent.
One problem that could come from the shrinking of the funds is that it would add roughly 2-3 percent annually to homeowners premiums over the next few years.
According to the NSF, insurance industry representatives were giving tentative backing to the proposal.
If all the changes were adopted, none would take effect until 2013, so lawmakers can postpone any changes until the next legislative session if necessary.
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