The economic crisis brings far more shocking news just about every day. This week was no distinct as executives from Common Motors, Ford, and Chrysler landed in Washington with their corporate jets to ask for their share of the $700 billion Troubled Asset Relief Plan.
In a shameless show of arrogance and entitlement, leaders of what applied to be “finest in class” businesses begged for billions of dollars with their tin cups outstretched in front of the US Congress. Prior to the Major 3 ever arrived in Washington, billions had currently been committed to AIG and some of the biggest economic institutions in the nation.
For the duration of this economic meltdown we're seeing a thing we under no circumstances anticipated to see in our lives – broken promises from significant corporations and government entities on a scale under no circumstances viewed as probable. We've reached a point exactly where even substantial businesses and substantial states like Florida cannot meet their obligations applying the bond markets.
If you are a Florida dwelling insurance coverage customer, your most significant asset is now at danger through the economic crisis – your Florida dwelling.
Can you name a far more sacred guarantee than the 1 a dwelling insurance coverage enterprise tends to make to you when it requires your cash and agrees to insure your dwelling?
When you acquire property owners insurance coverage in Florida the insurance coverage enterprise is promising you rapid and fair payment of your claim. Florida insurance coverage businesses acquire reinsurance to aid them make very good on this guarantee to you. Reinsurance is backup coverage that insurance coverage businesses acquire to aid guard themselves from large losses above specific levels.
The Florida Hurricane Catastrophe Fund was formed as a way to aid stabilize the Florida dwelling insurance coverage industry immediately after Hurricane Andrew triggered billions in harm to Florida in 1992. By providing reinsurance at very affordable prices, the fund helped to make property owners insurance coverage readily available and very affordable for lots of years.
That all changed immediately after the Florida hurricanes of 2004 and 2005 when Florida dwelling insurance coverage became overpriced and difficult to uncover once again.
The Florida legislature responded to the Florida dwelling insurance coverage crisis by voting in 2007 to expand the reinsurance sold by the Cat Fund by $12 billion – raising its total danger to a total of $28 billion. Florida dwelling insurance coverage businesses have been essential to obtain this extra reinsurance from the state and to pass along the savings realized on reinsurance to dwelling owners.
As a Florida homeowner, you did not get the price reductions that this law was supposed to offer. You did not get the 24% typical price reductions that have been predicted when the legislation passed. And to make issues worse, the Florida Cat Fund took on an extra $12 billion in danger.
Now the Florida Catastrophe Fund has told us that the frozen bond markets will not be an acceptable supply to raise the money it demands to meet its commitments to the insurance coverage businesses immediately after a significant Florida hurricane. It lately estimated that it could spend out $13 billion more than the subsequent twelve months – That is $15 billion significantly less than the $28 billion it is on the hook to spend!
What does all of this imply to you as a Florida dwelling insurance coverage customer?
You did not get the price relief you anticipated and your state took on economic obligations that it has no hope of paying.
You are at danger if Florida experiences a significant hurricane in the subsequent year. When the losses of your Florida dwelling insurance coverage enterprise exceed specific levels, your enterprise will ask the Florida Cat Fund to reimburse them in order to spend your claim. Considering that the Florida Cat Fund is quick on money, you may have a extended delay in finding your claim paid.
The guarantee to spend your Florida dwelling insurance coverage claim has under no circumstances been far more at danger than it is nowadays.
Now that you know that the Florida Cat Fund cannot meet its obligations, let's appear at the concept of a National Hurricane Catastrophe Fund that some in Florida have been pushing in Washington for lots of years. This National Cat fund would offer you an extra layer of loss protection above and beyond the obligations of the Florida Cat Fund.
The theory is that a National Catastrophe Fund would be funded in portion by insurance coverage premiums paid by policyholders in states that are portion of the fund. A National Cat Fund would be a separate fund that would earn interest and develop through the years when there are not any claims.
Supporters claim that no taxpayer cash would be required to sustain a National Cat Fund. History tells us there would be storms so substantial that federal tax dollars would have to be applied to cover significant losses.
And absolutely everyone knows that the federal government cannot maintain its funds separate. Just ask an individual in Washington to show you the billions that are supposed to be in the Social Safety Trust Fund. You will not be shown any money – just a drawer complete of T-Bills and IOU's.
Now that the Major 3 Auto makers and other shameless Fortune 500 businesses have beaten Florida to the punch in Washington, it is pretty unlikely that a National Hurricane Catastrophe Fund will pass anytime quickly. Even President Elect Obama will shy away from any extra federal obligations as he faces all of the red ink in Washington nowadays. So never appear to the federal government to make very good on the guarantee that was created to spend your Florida dwelling insurance coverage claim.
Lastly, Citizens House Insurance coverage Corporation has regularly reported that it does not have anyplace close to the cash it demands to spend out the virtually half a trillion dollars in hurricane exposure it immediately after a significant Florida hurricane.
A substantial hurricane would imply that Citizens cannot spend even its principal obligations – these that it ought to spend even ahead of losses attain levels exactly where Florida Hurricane Catastrophe Fund reinsurance kicks in. And as a policyholder with Citizens, you are topic to paying greater particular assessments immediately after a significant Florida hurricane than policyholders who have private property owners insurance coverage – particular charges tacked on to your annual insurance coverage bill.
In this new brave planet exactly where even governments cannot maintain their promises right here are some actions you ought to take as a Florida dwelling insurance coverage customer ideal now:
Get a Florida wind inspection performed and harden your dwelling as substantially as probable.
Keep away from Citizens Insurance coverage Florida if you can.
Come across a dwelling insurance coverage enterprise that is sturdy financially and 1 that has spread its danger across each Florida and other states. Fewer policyholders will imply more rapidly payment of your claim.
Report your insurance coverage claim the exact same day as the Florida hurricane. This will make it far more most likely that you will get paid ahead of your insurance coverage enterprise appears to the Florida Cat fund for reimbursement.
Final but not least. The reality that the Florida Cat Fund is quick on cash has not been lost on Florida dwelling insurance coverage businesses. They are getting charged for reinsurance by an entity that has publicly stated that it cannot meet its obligations. That implies insurance coverage businesses are not finding what they paid for.
You ought to count on Florida dwelling insurance coverage businesses to attempt to acquire far more of their reinsurance in the private industry and not from the State of Florida in 2009. And they will appear to pass that expense by way of to you in the type of greater insurance coverage prices. If they never get the price increases they will need, your Florida dwelling insurance coverage policy may be cancelled.
As the Florida dwelling insurance coverage crisis continues, it has under no circumstances been far more essential for you to keep on major of the Florida dwelling insurance coverage industry for private insurance coverage. You under no circumstances know when you may have to uncover a new Florida dwelling insurance coverage carrier.