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.

• Experience with state catastrophe funds shows they are susceptible to the political suppression of rates. The Florida fund is facing an $18 billion potential shortfall in 2009, and due to the current financial markets, the state is unable to borrow the money needed to covers its liability. Two key financial rating agencies, A.M. Best and Demotech, stated Florida legislators must shore up the fund before the June hurricane season or they will be forced to downgrade the financial ratings of dozens of insurance companies that rely on the state’s cat fund which could trigger banks to invalidate mortgages that require qualified insurance coverage.