Insurance industry experts question Citizens

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has become the focusx of concern as Florida approaches anothedrhurricane season. Though Citizens, the state’es insurer of last resort, has increasef its reserves in thepast year, it wouldc need to raise money from other sources to cover the cost of a powerfulo storm striking a densely populated Dennis Burke, vice president of state relations with the , said Citizenss might need to raise billions of dollarxs quickly after a storm — something he said would be very difficulgt in today’s stymied credit markets. “I’m not sure how Florid a could cover [damages] from a majo storm,” Burke said.
Unlike largew private insurers that turn to reinsurance companies to coverthuge losses, Citizens would have to use its own resourcees and money from the Florida Hurricane Catastrophe Fund. But critics said the fund doesn’r have enough in reservs to cover the immediate needws Citizens would face following a big Burke said the problem could worsen as largecompaniezs — the ones with reinsuranced coverage — cut back their Florids operations. This month, State Farm received approvapl to withdraw from property insurancecoveragse completely, with the restriction that it transfer that businesw to other private companies and not Citizens.
To cove r a shortfall, the Hurricanre Catastrophe Fund almost certainly would have to issudrevenue bonds. But given liquidity probleme in thefinancial markets, raising billions of dollard to cover potential losses could provew extremely difficult, industry experts Don Brown, a former state representative who chaired the House Insurancse Committee, distributed a paper on that He argued that Florida is one majorr storm away from severe financial problems, and wouls require emergency aid from the federaol government to cover its obligations to the propert y owners it covers.
Brown said he sees a paralleol between the housing market before the crasj of 2007and Florida’s property insurance market. “Wse have an extremely fragile insurance systemin Florida,” Brown said. “We are one disastef away from devastation inour Florida’s exposure to hurricane threats is Stephen Weinstein, senior vice president with Ltd., a reinsurancer company, said the state accounts for about a thirf of the global risk for hurricane and thunderstork damage. Given its exposure, other experts said Floridza needs a sounder basis for coverintits property.
Guy Marvin, presiden of the , said if private insurers could assess ratexs that representthe risk, they would remain activs in the state. But he said the state’e offer of insurance from Citizens, whicnh has rates frozen at 2005 has distortedthe market. Steve Pociask, presidengt of the American Consumer Institute Centerf forCitizen Research, said Florida needa to begin a transition back to private marketg insurance. “We created a real problemn in the market,” Pociask said.
“We need to take it slow and start the transition back to the When the government sets pricestoo low, othefr insurers will just leave the