The Catastrophic CAT Fund

The Florida Catastrophe Fund is in such dire state that Governor Charlie Crist’s Republican-controlled Legislature set up a deal with Warren Buffett’s Berkshire Hathaway Inc. to pay a $224M premium to borrow up to $4B toward paying claims to the Florida Hurricane Catastrophe Fund… if needed.

The CAT Fund pays claims when damages exceed $7B statewide.

Mr. Buffett’s financial portfolio includes such names as GEICO, Fruit of the Loom, NetJets, Dairy Queen and, now, a piece of the State of Florida. Of course, taxpayers foot the insurance bill, which is purchased at a rate of 5.6%. Any part of the $4B that is deemed necessary to borrow from the fund will put additional money in the pocket through bond purchases at 6.5%.

After meeting their claim requirements, certain costs from the cat fund are passed along to private insurers who in turn pass along the fees in the form of higher insurance premiums, as is now the case with State Farm. The request comes with some area rates increasing by 91% with an average of 47% statewide.

And still, compared to the 5.6% the State is paying Berkshire Hathaway, Florida homeowners don’t really have it all that bad… percentage-wise.

Let’s take for instance a home insured for $200K with full coverage including full sinkhole coverage, which is about 40% of the total premium but a very risky proposition anyway you look at it, and a 2% hurricane deductible: might pay a $1600 yearly premium. This would bring the insured amount to a low .8% rate. Even with a 50% rate hike from State Farm, the premium rate would be 1.2% of the amount insured.

Going back to the 5.6% rate of insurance that the State is paying to Berkshire Hathaway, you’d be paying $11,200 on a yearly basis.

Now that this has been explained in facts, figures, dollars and cents don’t you feel fortunate that your homeowner insurance is such a great bargain as compared to what it could possibly be?

You’re right. I don’t either. None of us, including the State, are exempt from the affects of a devastating hurricane and the damages that probably won’t be fully covered regardless which company takes your money and runs from inherent risks that they refuse to accept.

Worst of all for the homeowners of Florida is the blatant denial of coverage for those insured with companies that cancel policies right, left, north and south for properties along the coastlines. Insurance companies’ reduction in risk and higher premiums for the remaining policyholders, and the backup of CAT funds, makes for an assurance of their profits and less insurance to homeowners.

Soak It - Twist It

Get rid of the paper shredder and make it simpler,

and less time-consuming, to destroy personal data.

Put a stopper in the kitchen sink, and soak those letters,

bills and financial statements with a bit of water

then let them sit for a few minutes,

depending on the amount of paperwork, then give the wad a twist.

Try to separate and read the pages!

It’s quick and effective and you save a little on the electric bill.

Every little bit helps.