Insurance Reform and Competition

Did You Know Floridians Paid $1.5 Billion in Hidden “Hurricane Taxes”

Did You Know?

Florida Hurricane Catastrophe Fund (CAT Fund) hurricane taxes assessed on Floridians to pay for the six named storms of 2004-2005 will end this coming January – a year earlier than expected? However, Citizens Property Insurance Corporation (Citizens) hurricane taxes, also assessed for the back-to-back record-breaking 2004-2005 seasons, will continue to be assessed until 2017. To date, Citizens has received more than $1.5 billion in hurricane taxes from all Florida property and casualty insurance policyholders – auto, homeowners, businesses, charities, churches, renters and more.

Why does this matter to Florida’s business community?

Florida’s geographic location makes our state one of the most exposed places in the world to tropical windstorms and hurricanes. Of the 180 hurricanes that have made landfall in the continental United States since 1900, 65 have landed in Florida – the most of any state in the nation.

While it’s been nine years since the last major hurricane landfall, Florida’s experience during 2004 and 2005 shows our state is just one bad season away from tens of billions in damages. Between 2004 and 2005, Hurricanes Charley, Dennis, Frances, Ivan, Jeanne and Wilma hit Florida and caused more than $70 billion in damages. In addition, Hurricane Andrew in 1992 caused $25 billion in damages to Florida – equating to more than double that in today’s dollars.

The past nine years has allowed Florida’s insurance and reinsurance industry to build up reserves, but there still exists a major gap in how Florida addresses property and casualty insurance. If Citizens, the largest insurer in the state with more than 933,000 policies and $292.6 billion in total exposure, has a shortfall due to a series of storms, taxpayers are on the hook to pay these claims. These assessments could be borne by the business community.

Citizens currently has the authority to levy assessments on all property and casualty insurance in Florida including auto, business, home and renters insurance policies. This “emergency” assessment was put into place to help spread the risk among all policyholders in Florida in the event of a catastrophic storm. Currently, non-Citizens policyholders pay $136 million, or about 84 percent, yearly of the total assessments on all Florida property and causality insurance policies. These assessments are slated to be eliminated in early 2017.

Additionally, Citizens policyholders could be hit with a one-time 45 percent surcharge if Citizens depletes its savings and is unable to pay claims. This could impact businesses that rely on Citizens for property insurance coverage as well.

According to Stephen Weinstein, Senior Vice President with RenaissanceRe Holdings Ltd., Florida has taken significant steps in the last several years to strengthen the state’s property insurance market. Weinstein credits leadership at Florida’s Citizens Property Insurance Corporation and Florida Hurricane Catastrophe Fund for bolstering the financial position and reducing the risk of assessments on Floridians statewide.

“This has been complemented by the efforts of the executive leadership and professional management teams at Florida’s Citizens Property Insurance Corporation and Hurricane Catastrophe Fund to bolster their financial position and reduce the risk of assessments on Floridians statewide,” Weinstein said. “Collectively, these efforts have stabilized our property insurance system and attracted record levels of global capital to compete for Florida’s business. At the same time, Florida has also gotten lucky, by dodging a major storm for the past nine years.”

But this is Florida, after all, and our hurricane free streak could end at any time.

“In light of current conditions in the global private markets, Florida has an extraordinary opportunity right now to build on the success of recent years,” Weinstein explained. “This can be achieved by adopting a renewed business plan toward stability, in which insured risks are willingly borne by those who create them, and supported by a fairly priced, competitive private market, with our unique hurricane risk shared with and financed by private investors worldwide. We appreciate the significant and valuable reforms to date and hope to keep contributing to an ever more stable market for Florida’s consumers, homeowners and businesses.”

The stability referenced by Weinstein is a major step for Florida’s coastal communities, which accounts for approximately 80 percent of the state’s economic activity. Currently, the value of coastal property in Florida is roughly $2.0 trillion. This accounts for 80 percent of the state’s total residential and commercial property. More than 75 percent of Floridians live in a coastal county – meaning three out of four residents are in the direct landfall zone of a major hurricane. In addition, 12 of the 20 fastest growing coastal counties in the United States are located right here in the Sunshine State. Properties, both residential and commercial, within these counties have the most significant risk for hurricane damage due to high winds and storm surge. Ensuring stability for these communities throughout our state is a step in the right direction for our state’s slowly recovering property insurance systems.

And Citizens isn’t the only state-run liability that is in need of stability. The only state-sponsored reinsurance entity of its type, Florida’s CAT fund, may only be able to cover losses for one major storm or series of smaller storms. The CAT Fund is on the hook for $17 billion in claims, and while bonding capacity estimates show the CAT Fund may have the capability to pay these claims, Florida’s policyholders would have to foot the bill.

The end result? A system in which Florida’s financial stability could be decimated with one bad storm season, relying on post-storm assessments from Florida’s taxpayers for years to come.

Three Ways You Can Help Secure Florida’s Future:

  1. Join us at the 2014 Future of Florida Forum, September 29 – October 1. Join state business leaders, industry experts and elected officials as they discuss and explore how to secure Florida’s future, together. This year’s program features top level executives from several state agencies and identifies connection points and partnerships that will make Florida a state with vibrant communities, high-wage jobs and endless opportunities for global competitiveness. Register today and be part of the conversations that will help Florida stand out as the premier place to live, learn work and raise a family.
  2. Save the date for the Florida Chamber’s Annual Insurance Summit, January 21-23 at the Grand Floridian in Orlando. Plan to engage with the state’s top policymakers, industry leaders and business community experts as they tackle the challenges facing Florida’s insurance industry.
  3. Become a Florida Chamber Foundation Trustee and help provide a strategic direction for Florida’s future, to 2030 and beyond. For more information, contact Sal Nuzzo at 850-521-1283 or

Tell Us Your Story:

How has your business been affected by these assessments? Share your Florida story with us and stay tuned for more updates from The Florida Scorecard on Florida’s insurance industry.


About the Florida Scorecard Did You Know:

The Florida Scorecard, located at, presents metrics across Florida’s economy. Each week, the Florida Chamber Foundation produces a Scorecard Did You Know that takes an in-depth look at one specific statistic. If you would like additional information on the Weekly Scorecard Did You Know or on the Florida Scorecard, please contact Sal Nuzzo with the Florida Chamber Foundation at 850.521.1283 or You can also follow Sal on Twitter at @SalNuzzo and the Florida Chamber Foundation at @FLChamberFDN.

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