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Florida Voices: Reinsurance Market At Risk

Monday, September 10, 2012

Floridians understand the necessary precautions to take while preparing for a hurricane. Over the years FEMA and the State Emergency Operations Center have developed detailed precautionary measures and state execution strategies to handle natural disasters. Alongside these important processes includes maintaining a healthy and stable insurance market. If there is not a stable insurance market Florida runs the risk of losing many homes and businesses.

Insurance stabilization includes incentivizing and maintaining investments with reinsurance companies. The reinsurers enable insurance companies to transfer severe risk to private markets worldwide, instead of concentrating it in one state or nation. Florida has the highest risk ratio in the world and private reinsurance companies enable more affordable coverage in the Sunshine State.

Currently legislation has been reintroduced in Congress, HR 3157 and S 1693, by Rep. Richard Neal (D-MA) and Sen. Robert Menendez (D-NJ) that would levy exorbitant taxes on global insurance companies. Reinsurance companies in Florida provide nearly two-thirds of all the reinsurance throughout the United States and a considerable share of home and business property insurance in Florida. This legislation will create an anti-competitive tax structure and will drive up premiums unfairly in Florida, hurting businesses and homeowners across the state.

In concert with the legislation, there is also budget language in President Obama’s 2012 budget proposal which would deny a tax cut for certain reinsurance premiums paid to foreign-based affiliates by domestic insurers, further discouraging reinsurance companies to come to Florida.

Eight out of the 12 most costly U.S. disasters have affected Florida. Prior to the official start to the hurricane season Tropical Storm Beryl made landfall in Jacksonville. It is not possible to assume Florida will be spared from the majority of disasters. We must consider every possible precaution to diversify risk and incentivize the most secure insurance structure.

The Florida Insurance Council promotes a healthy insurance market and discourages any legislation that would encourage placing Florida’s safety of homes and businesses at a disadvantage. We encourage Floridian’s speaking to their local congressional members to raise awareness of this detrimental legislation. Florida cannot afford to risk losing a viable insurance market.

Sam Miller is executive vice president of the Florida Insurance Council.

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