This report from Towers Perrin on the effect of recent legislative changes to the Florida insurance market contains some eye-popping details:
- The legislation, even without considering future pressures on the state-run insurer and state-run catastrophe pool to take on even more risk, represents a dramatic shift to post-event financing, as opposed to the pre-event financing that is standard in the insurance business. In other words, if a big hurricane hits this year, Floridians may be paying off the bonds needed to satisfy the unfunded liability for 30 years.
- "Even a series of smaller storms across the state, similar to the 2004 season, would lead to assessments that exceed the incremental savings created by the legislation."
- "[A]n effect of post-event funding through assessments is to have lower hurricane risk areas subsidize higher risk areas." Look at the map provided on page 7 to see how some areas of the state subsidize others.
- Per household assessments to pay for a major hurricane could run as $14,000.
- Risk is increasingly being spread to auto insurance and commercial premiums through surcharges collected to fund the catastrophe pool. Businesses will have to pass these costs on to consumers and other businesses.