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Even cities gasp at insurance bills

Had a tough time getting affordable property insurance? So have St. Petersburg, Tampa and other local governments.

Published March 22, 2006

Florida homeowners aren't the only ones getting hammered by skyrocketing insurance rates this year.

After two punishing hurricane seasons, local governments across Tampa Bay are being asked to pay twice or even three times as much for property insurance.

Some cities simply can't get full coverage, which means they must cross their fingers and hope for the best or depend on the federal government if a Katrina-like storm hits.

"It's scary," said St. Petersburg City Council Chairman Bill Foster. "You feel very exposed. That's not a good feeling."

St. Petersburg is expecting to pay nearly twice as much for half as much coverage in 2006-07. The situation is the same for the city of Tampa. In Clearwater, the city's insurance broker is predicting a 300 percent rate increase.

Cities throughout Florida and along the Gulf Coast are experiencing similar problems, said Byron Beard, underwriting manager for the Florida League of Cities. "This is probably going to be a big problem for everyone before this is all over," he said.

The underlying cause: reinsurance.

Reinsurance is basically insurance for insurance companies. An insurance company, such as Allstate or Nationwide, will look to the reinsurance market to help fully cover the cost of a policy.

The 2004 and 2005 storm seasons forced reinsurance costs to soar. Insurance companies pass along that cost by charging more and refusing to write large policies.

"The insurance companies' financials are strained to the point where they can't offer the limits they did in the past," Beard said. "It's going to happen any place where there's a high potential for some kind of disaster, like Florida and Louisiana."

In St. Petersburg, the City Council has called for a special session Thursday to discuss the situation.

Mike Connors, the city's internal services administrator, said the city now pays $610,000 for $250-million in coverage for water-related facilities, such as sewage treatment plants. That cost is expected to rise to $876,000 this year for the same amount of coverage.

All of the city's other facilities - including Tropicana Field, the Mahaffey Theater, recreation centers and police and fire stations - now pay $2-million annually for $520-million in coverage.

Next year, the city will pay $3.12-million for only $250-million in coverage, Connors said.

The Hillsborough Aviation Authority is in a similar position, said Sharon Weaver, senior director of administration and information technology for the authority.

"It's just dreadful," she said. "It's a terrible situation we're in right now. Our premiums went up and we didn't have any claims."

The authority will pay $2.6-million for property insurance this year with a $50-million limit on windstorm damage. The expiring policy cost $1.3-million with a $100-million windstorm damage limit.

Finding a policy at all wasn't easy.

Only three companies were available to provide insurance coverage, and one company chose not to bid on the contract because it didn't have the capacity, Weaver said.

The city of Tampa in the next few weeks should have final numbers for the cost of insuring $1-billion worth of properties, including the Tampa Convention Center, Tampa Bay Performing Arts Center and a major water treatment plant.

Many city properties are in flood zones near the Hillsborough River or Tampa Bay.

"That makes it especially difficult to get coverage," said Michael McNabb, Tampa's risk manager. "We're all fishing in the same market, and there are only so many reinsurers. They're being really selective in Florida, Texas and Louisiana about the risks they take on."

Last year, the city paid $3-million for property insurance. McNabb said he expects to pay more for less coverage this year, as other governments do, even though Tampa filed no claims after last year's busy hurricane season.

"But they do these models and decide some areas are just too risky to insure," he said. "That's just the nature of the business."

Hillsborough County also is shopping around for a policy for $1.5-billion worth of property, with final figures due next month.

In Clearwater, projected rate increases are forcing the city, which traditionally covered the majority of facilities for a comprehensive range of dangers, to consider a change of philosophy.

"We've discussed being more selective in what we insure and the perils for which we insure," said Assistant City Manager Gary Brumback. "We may not have universal coverage on every stick in every building."

Prices also are expected to rise in Largo, and in Citrus and Hernando counties.

The situation facing Florida localities is just the latest sign of an insurance crisis spawned by back-to-back active hurricane seasons. Since November, Florida Chief Financial Officer Tom Gallagher has warned that, without significant reform, a beleaguered reinsurance market would likely mean much higher insurance rates for all Floridians.

Among the ideas backed by Gallagher: persuading Congress to create a national government-backed reinsurance fund similar to a state-backed fund Florida created after Hurricane Andrew in 1992. The concept allows insurers to buy reinsurance at much cheaper rates, with taxpayers ultimately on the hook for extraordinary losses if the collected premiums aren't enough.

So far the proposal has seen little support in Washington, D.C., and state lawmakers are starting to contemplate a host of other tweaks to the state's insurance regulation in hopes of encouraging private insurers to gamble again on Florida. But nearly everyone agrees only one things is certain, even with reform: higher rates for the foreseeable future.

St. Petersburg City Council member Earnest Williams, who owns an insurance agency, said he hopes the idea of a national reinsurance fund catches on before a Florida city is forced to test the limits of its insurance policy.

"It's not a hopeless situation but we need people to understand there is a real concern with property insurance," Williams said. "We're all getting boxed into a bad position and somebody needs to do something about it."

Times staff writers Chandra Broadwater, Lorri Helfand, Joni James and Catherine Shoichet contributed to this report.

[Last modified March 22, 2006, 02:16:23]

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