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Florida's Big Hurricane Gamble

First, the legislators promised as much as $32 billion for insurers, and ultimately homeowners, if a major hurricane hits. This money would come from the state's catastrophe fund, which currently counts less than $1 billion on hand for such payouts, though it annually collects premiums from insurers.

The second set of changes affects Citizens Property, the state-chartered insurance corporation, which is Florida's largest insurer. Most of its policies are focused in the state's hurricane-prone south, where many private insurers refuse to do business.

The new legislation lowers Citizens premiums even though those premiums were already arguably too low to support the claims it has to make: The company ran out of money in 2004 and 2005, and it received $715 million from the state's general fund and imposed surcharges on insurance bills across the state to pay claims.

The projected shortfalls could be staggering in the event of a major hurricane strike. If, for example, something like the 1926 Miami hurricane were to hit next year, the state entities by some industry estimates would have to raise an additional $40 billion, or more than $5,000 for every Florida household. The federal government probably would be asked to pitch in to alleviate the burden.

"The legislature's 'savings' for homeowners are largely illusory," said Robert Hartwig, president and chief economist of the Insurance Information Institute, an industry group. "When the next big hurricane strikes in Florida, somebody is going to have to pay."

At the root of the trouble is that insuring against a major storm in much of South Florida has been deemed simply too risky to be affordable.

While private insurers generally plan for a severe "once in 100 years" storm, the state-chartered company bases its premiums on a lesser "once in 35 years" storm.

Planning for a more severe storm, while it might seem like common sense, may make premiums unaffordable for too many people.

"What everybody knows is that no one could charge enough in the high-risk areas of Florida to cover the potential damage in a one-in-100-year storm," said Rocky Scott, spokesman for Citizens. "We just can't do it."

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