The USA TODAY reports that if a major hurricane were to hit coastal communities, its devastating financial effects could reach far beyond those who actually incur damages.
After Hurricane Katrina, private insurers fled coastal areas, including Florida, which caused many states to expand their own insurance companies. For instance, in Florida we have seen the recent expansion of Citizens Insurance despite the legislative’s mandate that it be the insurer of last resort. Nonetheless, much of the legislation that either created or expanded these state-owned insurance companies, such as Citizens herein Florida, contain provisions allowing states to enforce large surcharges on other insurance companies and on other policyholders.
But why would the State of Florida need to enforce such a surcharge? Here are some facts: Citizens, Florida’s insurance plan, currently insures property worth $433 billion. However, Citizens only has $10.5 billion in cash reserves and reinsurance, which in simple terms is insurance for insurance companies whenever they have to make a big payout.
Simple math tells us Florida’s insurance plan is vastly underfunded. If a large hurricane were to hit Florida, surcharges are almost a certainty. Plus, these surcharges can be levied on almost any insurance policy, including auto, property, and liability insurance.
According to FEMA Administrator, Craig Fugate, “If [Florida] [has] a major hurricane such as Andrew, they’re going to be in a lot of trouble.”
Therefore, it is important that you check the financial strength of your insurance companies, especially now during the height of hurricane season.
If you are facing a dispute over an insurance claim in Florida, contact Alvarez & Barbara, LLP toll free at 866-518-2913 for a free and confidential consultation to discuss your rights.