CFO proposes insurance market overhaul

Tom Gallagher's ideas to rein in costs must get congressional approval to become reality.

By JONI JAMES
Published November 7, 2005

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TALLAHASSEE - Thirteen years after he helped craft a solution for stabilizing Florida's insurance market in the wake of Hurricane Andrew, state Chief Financial Officer Tom Gallagher proposed another major overhaul aimed at curbing Florida's skyrocketing insurance prices.

Gallagher's proposal released Monday is a grab bag of ideas, from removing exemptions in the state's building-codes in order to lessen future claims to allowing homeowners to save money tax free to pay for hurricane expenses.

The biggest potential impact of his plan rests on encouraging investors in Florida's reinsurance market - the sector that provides coverage to insurance companies to help them recoup some losses from unexpected events. Gallagher said reinsurance costs have soared in the wake of the 2004 and 2005 hurricane seasons and the Asian Tsunami, resulting in higher premiums for Florida homeowners.

But much of Gallagher's proposal, and its potential effectiveness, is dependent on Congress. For more than a decade, Gallagher has called for the establishment of a national-government backed catastrophic reinsurance fund, much like the state-backed hurricane reinsurance fund created after Hurricane Andrew. This year, Gov. Jeb Bush has joined his cause, including testifying before Congress last month that some national scheme is needed to keep insurance affordable in Florida and elsewhere.

Gallagher also wants Congress to approve tax-free catastrophic reserves for insurance companies, something the industry has pushed for years. Amassing reserves tax free will limit insurance companies need to buy reinsurance, which may help restrain future increases in homeowners premiums, Gallagher said.