Flirting With Disaster

Florida's bet against Mother Nature puts its environment and economy at risk.

AMERICA HAS a bad habit of building in areas that don't make sense environmentally or actuarially. That habit has been aided and abetted by public officials who bend to the will of developers and their customers, despite storms, floods, earthquakes and other natural calamities that destroy lives and break banks. The latest example of this can be found in Florida. By rolling back insurance rates, spreading the risk and fiddling with its catastrophe fund, the Sunshine State has invited more development in dangerous places.

Make no mistake, Floridians needed relief from insurance premiums that had doubled or tripled. But in keeping a campaign promise to cut rates, Gov. Charlie Crist (R) and the legislature not only are gambling with the state's fiscal future but also are giving people an incentive to keep putting themselves in harm's way.

Florida is the country's first pin in hurricane alley. The major storms of the 2004 and 2005 seasons and their respective $20 billion and $10 billion payouts sent the insurance industry fleeing from the state. Those that stayed either stripped high-risk policyholders of coverage or jacked up premiums so high that they threatened to cripple Florida's economy, which is dependent upon development and the people who move there because of it.

So here's what Crist & Co. did: The state-run insurer of last resort, Citizens Property Insurance Corp., which is also the state's largest property insurer, rolled back planned rate increases. It can now spread the risk by offering other policies, such as fire and theft. And it will offer its subsidized rates to commercial property. Private companies buying reinsurance from the state at greatly reduced rates must pass the savings to consumers through lower premiums.

Meanwhile, the threshold for troubled insurers to tap into the Florida Hurricane Catastrophe Fund was dropped from $6 billion to $3 billion and the upper limit on claims to be paid out by the state was raised from $16 billion to $32 billion. There's only $1 billion in the fund. If another major storm hits Florida -- a likelihood on a par with the sun rising in the east -- the state is on the hook. The "no big deal, we'll just bond it out" attitude is as irresponsible as the "let's pray we don't get hit by another Big One" wishful thinking gripping many in Tallahassee.

We live in an era of rapid climate change with the potential for more frequent and more destructive storms. Everyone -- from politicians to the voters they aim to please -- must understand that there is a cost to offering below-market insurance that fuels unrestrained building in high-risk areas. Betting against Mother Nature is never a winning proposition.