State to change insurance system

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"`It gets at a bigger issue, and that is that you have to make the risk insurable,'' May said.

Building codes and enforcement policies are being checked as well as the number of inspectors and the methods they use in doing their jobs, May said.

"We have to give local communities an incentive to build better structures to withstand windstorms,'' May said.

Last year, the state began its Hurricane Catastrophe Fund. The fund is built through premiums paid by insurance customers. The fund has been growing. The fund should have about $1.2 billion in it by the end of this year. If there is a catastrophe, the money could be bonded out, a move that could generate about $4 billion.

The fund is growing faster than expected because the state won tax-exempt status for it. That saved $140 million this year and will save another $250 million next year. The strategy is to provide an environment that is attractive to insurance companies. More companies doing business will mean more competition and lower rates, May said.

About 750,000 homeowner policies are backed by the state. Those policies, known as JUAs, are assigned by the Joint Underwriters Association. Insurance companies fund the JUA pool of money by paying a percentage equal to their share of business in the state. A company with 18 percent of the market funds 18 percent of the pool.

Under a proposal by Nelson, companies would be able to bring down the share of what they pay into the pool by separately insuring JUAs, thereby removing those policies from the state-backed pool. Thus, a company with 18 percent of the market that takes over 18 percent of the JUAs would no longer have to pay into the pool.

Scotty Butler, general counsel for Florida Farm Bureau insurance in Gainesville, said it's probably not possible for the state or insurance companies to have enough money set aside if there is a catastrophic storm. Florida Farm Bureau had just updated its computer records for the Homestead area before Hurricane Andrew hit. The cost to its clients still exceeded projected claims by tens of millions of dollars.