REALITY: Florida’s reinsurance catastrophe fund benefits insurance companies by giving them taxpayer-backed reinsurance while providing little relief to consumers for the cost of homeowners insurance.

• Florida is only the state catastrophe fund writing reinsurance. In effect, it makes consumers the reinsurers for insurers. The state fund offers insurers inexpensive reinsurance premiums up front, enabling insurers to off load substantial risk onto consumers. When a hurricane occurs that depletes the fund’s cash reserves (as in 2004 and 2005), the fund issues bonds. The insurance companies who bought the state’s cheap reinsurance do not pay the bond debt. The debt is paid by taxing Florida policyholders of other lines of insurance, such as automobile insurance and commercial insurance, including municipalities, daycare centers, school districts and small businesses via assessments.
  

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