About $1 billion in cash to pay Charley’s claims will come from the state’s catastrophe fund. Even after that payment, the state says the fund will remain solvent.
Tami Torres says, "The key is, is that there is $5 billion of cash on hand to help pay for claims. That also means that the companies have access to issuing bonds to help pay for claims as well."
There is general agreement that the Florida insurance market is in better shape than it was before Hurricane Andrew, but Charley did about $7 billion worth of damage and there are now questions about how much more the market can absorb before the rate increases.
Theoretically, the state’s insurance companies have reserves to pay for a storm causing $32 billion in damages, but Charley has already cut into the reserves, lowering what the industry can handle.
If Frances causes even $11 billion in damage the state fund would be dry and it would have to sell bonds, triggering at least a two percent assessment on every policy written in Florida. After Charley, the insurance industry is already reassessing the rates it currently charges.
Jeff Grandy says, "I believe that the carriers will have to assess where they are, and what their exposures here are in Florida. A lot of folks before Charley thought that Orlando was inland and we’ve quickly found out that there are no inland places in Florida."
With one storm down, another on its way and 90 days left in hurricane season, the insurance industry is nervous.
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