Observations and musings on Jacksonville Politics

Wall Street Journal Slams Charlie Crist, Says FL Headed For Disaster

Tagging him “Hurricane Charlie,” the conservative Wall Street Journal slammed Florida Governor Charlie Crist this week.  The newspaper cites Crist’s recent veto of property insurance reform as one of the major reasons Crist wants to get out of Tallahassee “before the next hurricane hits.”  His veto, says the Journal, “all but guarantees a state disaster.”

The bill would have trimmed the cost of a state-run enterprise that insures homeowners against storm damage. The program has an $18 billion unfunded liability and has taxpayers on the line for tens of billions in property losses from the next major hurricane. The Republican legislature tried to reduce those future losses, but Mr. Crist sounded like Barney Frank rolling the dice on Fannie Mae in declaring there’s nothing to worry about.

By way of background, two years ago Mr. Crist gave a big gift to coastal property owners by converting the state of Florida into one of the world’s largest property insurers. The Citizens Property Insurance Corporation provides below market-rate insurance policies directly to homeowners. Meanwhile, the Florida Hurricane Catastrophe Fund (CAT) regulates how much private insurers can charge homeowners and requires companies to purchase low-cost reinsurance from the government. Mr. Crist didn’t invent these programs, but he vastly expanded their reach — to about one million policies today. He transformed Citizens from insurer of last to first resort.

Here’s the problem: This system isn’t even within a coastal mile of being actuarially sound. The state government acknowledges that in many high-storm risk areas the premiums are from 35% to 65% below what is needed to cover potential claims. That subsidy has made Mr. Crist popular with many coastal residents even as the state plays Russian roulette with the weather.

You can read the rest of the article here.


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2 Responses - Comments are closed.

  1. Arthro says:

    WSJ is right on target. In the face of overwhelming support, Crist vetoed the bill so he could avoid being labeled as the guy who made insurance rates go up. But the Florida legislature knows that he has created a nightmare scenario. They tried to fix it with HB 1171, but with his veto, he about guaranteed that the state will be bankrupt and the Florida domestic insurers won’t be able to honor their claims once the next hurricane hits Florida. He also about guaranteed that their will need to be a federal bailout, requiring people from the other 49 states to foot the bill for his mismanagement of property insurance. He should thank them in advance.

    Not only is his veto ridiculous, it is very bothersome that throughout this process, Crist has not even offered any options except to keep us on the path to a financial meltdown. His veto was based on the claim that many new insurers were coming to the state, but this week we found out that it isn’t true – the new capital he was referring to was 93% surplus lines. Yes, unregulated surplus lines insurers. So their isns’t a lot of new capital coming into the state, and he has succeeded in chasing out the last major insurer in Florida, State Farm. Now we only have a bunch of rinky dink, no name, thinly capitalized insurers to rebuild Florida…if they are still standing after the wind blows.

    For Crist, it’s all about getting votes for him and prayng we won’t have a hurricane. If we do, his house of cards will fall apart, and it will be too late for Florida to fix it.

  2. YellowBluffRoad says:

    Hear, hear. Thanks WSJ. “Hurricane Charlie” is right! The fly-by-night insurers he’s selling the state’s financial soul to scare the heck out of me! He’s staking our financial future on underregulated, undercapitalized, actuarially unsound insurance companies, and driving the remaining traditional insurers out. Brilliant move.

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