In the wake of extensive damage from Hurricane Helene, a Florida congressman’s proposal to spread out insurance risks associated with major storms and wildfires has gained renewed attention on Fox news and other media outlets.
The measure authored by Florida Rep. Jared Moskowitz, House Resolution 3525, was introduced last year and titled the National Disaster Risk Reinsurance Program Act of 2023. Under the measure’s provisions, states could voluntarily take part in a program designed to lower the “reinsurance” costs that insurers pay.
Reinsurance refers to a private reimbursement system that insurers use to protect against insolvency in the event of a major natural disaster. Florida insurers have had to purchase higher amounts of reinsurance to protect against more frequent hurricanes and other catastrophic events, according to Moskowitz’s office.
The legislation would have the federal government step in and guarantee part of the costs now passed on to homeowners when major disasters strike by issuing post-event bonds to insurers and capping reinsurance requirements for such major events. States would then have a decade to pay back the total amount they were given.
The current reinsurance system in use in Florida and elsewhere is problematic because reinsurers are not mandated to charge actuarially sound rates, according to a recent report by the South Florida Regional Planning Council.
“Their rates are generally not regulated by any organization, (and) the reinsurers alone decide on the cost of reinsurance,” the council’s March 2024 report states.
Markowitz’s proposal could reduce yearly homeowner premium increases in Florida by 25%, with the average Florida homeowner saving $1,500 in the first year and potentially more in future years. Currently, Florida homeowners pay four times the national average for homeowners insurance, a level equal to about 9% of the state’s median household income, according to the council’s report.
The insurance industry, however, has questioned whether the Moskowitz bill would deliver on its promises. Some observers in the industry argue that the assumptions that underlie the legislation are not realistic in terms of guaranteeing reduced premium costs.
Jimi Grande, senior vice president of federal and political affairs for the National Association of Mutual Insurance Companies (NAMIC), stressed that more discussion about the legislation is needed.
“With any major program like this, the devil will always be in the details,” Grande told the Florida Record in an email. “To have any chance of passage next year, it’s going to have to be made clear if this program could actually reduce costs, or whether it would simply shift the burden to those in less risky areas.”
In a recent interview on Fox News, Moskowitz, a Democrat who once served as the state’s director of emergency management, said the bill’s provisions would not increase the federal deficit.
“It would allow states to buy bonds that when we have these 1-in-1,000-year storms would take that off of the plates of the insurance companies, which is driving up 25% of the cost on reinsurance,” Moskowitz said. “Even if my bill doesn’t move or go anywhere, I think the United States government and Congress have to start realizing that we have to amortize the risk.”
The South Florida Regional Planning Council report lists several cost drivers for property insurance premiums in the state, including inflation and global supply-chain issues, development pressures due to a burgeoning population, climate change and litigated insurance claims.
The litigation costs have made up a large share in insurance costs in Florida in past years, according to the report, but recently passed reforms barring the assignment of insurance benefits to third parties have attempted to address excessive litigation over property losses.
But reinsurance represents the predominant cost driver for Florida property insurance premiums – up to 50% of the average policy cost – the report says.