Reform Bill Would Slash Homeowner's Insurance 25% in Florida

StormPhoto byMax LaRochelleonUnsplash

A congressional bill being proposed would change the amount of re-insurance required of insurance companies by half. Right now, insurance companies are required to purchase enough reinsurance to cover claims from a storm that has a 1-in-130-year chance of occurring.

Steve Geller, the current Broward County commissioner, said that such a storm has never occurred in Florida, and a 1 in 50 year storm has not hit Florida since the 1920's.

The bill submitted by Democrat Rep. Jared Moskowitz, would require the U.S. Treasury Department to issue 10-year Treasury notes to cover damage beyond what would be generated by a 1-in-50-year storm.

(Re-insurance spreads the risk taken on by insurance companies when they insurance your home. It is insurance that an insurance company purchases from another insurance company to insulate itself (at least in part) from the risk of a major claims event.) That practice is common in areas prone to natural disasters.

Re-insurance makes up about half of the cost of insurance, and a reduction in that requirement would reduce homeowner's premiums by about 25%. The proposed bill would benefit homeowners across the nation, not just in Florida.

Critics of the bill point out that a 1 in 50 year storm is becoming more likely with warming ocean temperatures. Also, "several national insurers are in the reinsurance business as well. They would likely lobby to block any plan that erodes their revenue stream." Geller said.