TALLAHASSEE (CBSMiami/AP) — The upcoming hurricane season is just weeks away, but Florida is entering the new storm season with positive news.
The state-created fund that backs up private insurers in Florida has billions in the bank and appears capable of withstanding a big storm again this year.
New projections show the Florida Hurricane Catastrophe Fund should have nearly $13 billion available for the Atlantic hurricane season that starts June 1.
On Thursday, an advisory panel for the fund will hear Wall Street firm estimates on how much money the fund would have to borrow if Florida was hit with a devastating storm. Those estimates show that the fund should be able borrow more than $8 billion — or about twice what would be needed to pay all potential claims.
Florida created the fund after Hurricane Andrew ravaged the state in 1992. It offers insurance companies reinsurance at prices generally lower than those in the private market. It was designed to help keep private insurers from leaving the state. Every company is required to purchase coverage to pay off claims after insurers reach a certain level of damages.
The financial health of the fund is important because the state can place a surcharge on most insurance policies, including auto insurance, if the “Cat Fund” runs out of money. Some critics of the back-up fund have called this a “hurricane tax.”
The situation still isn’t perfect: Multiple large storms over a two-year period could leave the fund short of money. Florida was hit with a series of storms in 2004 and 2005. Floridians are still paying extra on their insurance policies to pay off money borrowed in the wake of Hurricane Wilma.
Still, this year’s situation is much better than it was during the height of the Great Recession, when convulsions in the financial industry created fears that the fund would not be able to pay off its claims.
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