[StBernard] Louisiana Blanco Threatens Bet On Florida Insurance Model

[Westley Annis]

It came from BayouBuzz.com

-----Original Message-----
Westley, who wrote this article?  Sounds like a good commercial for State
Farm or Allstate. 
 
I don't know if what Florida did is the correct thing or not but I am so
tired of these "legal thieves" being in the catbird seat.
 
JLY


 

	-----------------------------------------------------
	While returning from a meeting in California with the Property and
Casualty
	Insurers of America, Governor Blanco made a rather provocative
statement in
	a telephone interview with a reporter. Here is her statement: "I
told (the
	insurers) that we want them to come in and fill the voids, or else
(our)
	state government is going to do something like Florida has done."
	
	To understand the magnitude and potential consequences of
	Governor Blanco's comment, one first has to understand exactly what
Florida
	"has done" in its recent special session on insurance.
	
	First, Florida took its insurer of last resort-the state-created
	Citizens Property and Casualty Insurance Company-and made it a
direct
	competitor with the private insurance industry. The Legislature
removed a 56
	percent rate increase for Citizens that was scheduled to go into
effect, and
	retroactively removed a 12 percent increase that went into effect
January 1
	of this year. They gave Citizens permission and encouragement to
expand its
	policy limits and write policies in lines of insurance from which it
had
	previously been barred. Additionally, if Citizens gets hit with
losses (a
	strong possibility for an undercapitalized carrier), every property
and
	casualty, general liability, automobile, and workers comp policy in
Florida
	will be assessed a fee until Citizens' losses are paid. State
officials in
	Florida profess the belief that a surge in underwritings by a
greatly
	under-capitalized, state-backed competitor will force the private
insurance
	industry to reduce its rates in order to compete with Citizens for a
market
	that is rife with open-ended risks.
	
	Second, the Florida Legislature greatly expanded the role of its
	Catastrophe (Cat) Fund without putting any cash into its coffers.
The
	fund-originally created a decade ago-slowly accumulated a reserve of
$6
	billion in its first 10 years of existence. The hurricanes that
struck
	Florida in 2004-2005 bankrupted the fund and forced the state to put
$715
	million into it, as well as floating a bond issue backed by policy
	assessments to make it solvent. In the recent special session, the
	Legislature added another $16 billion layer to the fund, putting the
	state/citizenry on the hook for approximately $35 billion if more
	catastrophic storms come Florida's way-which they certainly will at
some
	point.
	
	Basically, Florida's governmental leaders walked into the
	weather "casino" and bet $40 billion or more on red. If the
hurricane winds
	blow, they will be incapable of paying off the losses without
massive
	assessments on almost every insurance policy in Florida and perhaps
	significant tax increases on top of that. If that happens, almost
all forms
	of insurance in Florida will increase drastically in cost, and the
fiscal
	stability of the state will be called into question.
	
	When Governor Blanco-or members of our Legislature-proclaim that
	they harbor intentions to "do what Florida has done," everyone
should
	understand clearly what they are talking about. It means that they
plan to
	take our "insurer of last resort"-Louisiana's Citizens Insurance
Company
	that was copied from Florida-and allow it to take on a huge book of
business
	and compete directly with the private insurance industry. If that
happens,
	every insurance policyholder in the state will be at risk for paying
huge
	increases in many lines of insurance if Citizens again encounters
	significant losses. As Citizens' book of business swells, its
ability to get
	critical reinsurance will degrade, putting taxpayers and
policyholders even
	more on the hook.
	
	If Governor Blanco wants to join Florida at the tables in the
	weather "casino," she does so at your peril and mine. 
	(This column was written before the Florida tornado tragedy)