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Florida Hurricane Insurance as a Local Taxing Authority (2008)

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The Florida Hurricane Insurance as a Local Taxing Authority did not appear on the November 4, 2008 statewide ballot in Florida as an initiated constitutional amendment. The measure would have required hurricane insurance coverage for all properties outside of Florida's Coastal Barrier Resource areas and other "ineligible" properties be underwritten by the State, to be funded from property tax revenue, and that such insurance cover all damage associated with hurricanes, including water and wind related damage.[1]

Ballot summary

The measure's official ballot summary was:

Create Hurricane Insurance with component flood and windstorm perils (FHW) that shall be written by the State on all Florida properties whether municipal, public residential or commercial, except in Coastal Barrier Resources Areas or other "Properties Ineligible." All properties except "Properties Ineligible" shall have vouchers and separate accounts. Hurricane Insurance shall be a local property taxing authority and part of the annual property taxes.

Explanation and background

The proposed legislation would have meant that payments for hurricane insurance become a mandatory item in the property tax bills of Floridians, whether commercial and residential individuals or the municipalities and school boards. The State would only write hurricane disaster coverage. A disaster, normally, is defined as four or more properties damaged from the same peril and declared by the Governor. By contrast, damage to a single property would still be covered by personal choice through self insurance or purchase of private insurance.

Each property owner would receive a voucher for insurance, which they could use to purchase FHW coverage on the private market or they could keep and simply be insured by the State. Vouchers are free market. The voucher represents insurance if the property owner does nothing. As a mandatory item, the "hurricane" insurance would be a voucher of "reinsurance by the State" to the private insurance carrier. The State voucher would only be acquired by the private insurance carrier through insuring the homeowner or business or public property. Or the property owner could choose not to exercise the voucher, yet the hurricane insurance written by the State would remain in force. If the property owner goes to the private insurance market, the voucher represents "reinsurance" by the State only if the private carrier agrees to the terms of the voucher to cover all hurricane peril. The private insurance carrier can ignore the voucher and cover other perils if it chooses. The property owner would retain the choice to do nothing or trade in the State "standard" model for a private insurance carrier "deluxe" model. Private insurance carriers could insure through the voucher or around the voucher. Through the voucher conveys "reinsurance by the State" to the carrier for the amount stated on the voucher, around the voucher means the insurer chooses not to cover the FHW peril nor have access to "reinsurance by the State."

The “hurricane” insurance reserve accrues to each property in separate accounts. This reserve valuation is attached to the property and not the individual. The separate account means that the reserve for the "big one" like Katrina that the state estimates will cost $60 billion will be held in accounts per property not one big slush fund. This means if a property never has damage for 20 years or so, then the reserve cost to that property must be very very small. The reserve is based on the cost of a decade of damage by hurricanes in Florida accrued over 30 years against each property account.

Vouchers and separate accounts are attempts to add free market choice by the former and accountability by the latter to government-based programs.

"Properties Ineligible" shall not have vouchers or separate accounts. Properties not eligible shall be those within Florida that are ineligible for flood insurance, that have been subject to mitigation for flood by the Federal Government, or that are located in Coastal Barrier Resources Areas.[2]

Flooding is involved in about 90 percent of all U.S. natural disasters. Flood-damage is insured by the US government under its National Flood Insurance Program (NFIP).[3] The Government Accountability Office (GAO) has said private insurers selling both wind and flood policies to the same homeowner poses a potential conflict of interest. Expanding the NFIP to cover wind damage was proposed in a bill approved by the US House in September 2007. The Bush administration has threatened to veto the House bill. In Testimony before Congressional Committees the insurance industry opposes expansion of NFIP to cover wind.

Supporters

This initiative was sponsored by the Hurricane Insurance Creation PAC. After Katrina, some homeowners accused insurers of refusing to provide coverage by blaming hurricane damage on flooding. Supporters argue that this initiative would protect Floridians from the exclusions included in most private insurance property policies, which try to avoid covering property for water/flood damage that occurs during hurricanes even on policies that cover some hurricane damage.[4]

The sponsors of this initiative stated that they are seeking at the State of Florida government level a way to simultaneously protect vulnerable homeowners at a reasonable cost, avoid taxpayer subsidies to well-to-do beach house owners and not encourage overdevelopment in flood-prone areas in the State of Florida.

Opposition

Paul Davis, a Florida Residential Real Estate Appraiser / Real Estate Broker / Building Contractor, saw this initiative as a way to enrich insurance companies at the expense of taxpayers. He argued that Floridians should be free to buy or not buy hurricane insurance based on their personal choice.[5]

Status

The initiative was approved for circulation by the Florida Secretary of State. To be placed on the November 2008 ballot, 611,009 valid signatures needed to be submitted by January 25, 2008. In Florida, signatures are only valid for up to four years, however, the initiative can be circulated indefinitely. This measure did not make the ballot.

See also

Related measures

Other measures sponsored by Hurricane Insurance Creation:

External links

References