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Blow Hard

Florida’s combative insurance commissioner, Kevin McCarty, sees no knockout punch from a major storm in his state’s future.

By  Ed Leefeldt

[Page 2 of 7]

If a catastrophic natural disaster of biblical proportions overwhelms the entire system, all bets are off. We have to prepare for what’s expected and have the best possible plan for the unexpected.

Would you then have to ask the federal government for a bailout?

At the end of the day, some events are uninsurable. Why is a hurricane hitting New Orleans a national problem, but when it hits Florida it’s not? Somewhere, sometime there will be a catastrophe where the federal government has to come in and pay.

You’ve lobbied Washington for a national hurricane catastrophe fund. Would this work?

There’s no silver bullet. But U.S. Rep. Ron Klein, D-Fla., is presenting a bill in Congress to create a consortium that could sell bonds backed by the federal government to private investors that would pay for damage claims after catastrophes. States would then repay the bondholders.

Why should any taxpayer pay for “beach house bailouts” for Sylvester Stallone, John Travolta or Donald Trump when they build multimillion-dollar homes on Florida’s coast?

Inland Florida is just as prone to hurricane damage as mansions on the coast. When a hurricane crosses Florida, it loses only about 15 miles per hour in wind speed. No place is safe.

Looking back, what brought the state—and you—to this point?

Hurricane Andrew in 1992 caught all of us off guard. Back then, land, taxes and insurance were all cheap. Not anymore. Dade County has the highest insurance rates in the world.

After the $25 billion in losses from Andrew, we put in strict new building codes, raised deductibles and shifted billions of dollars of exposure to policyholders. We provided cheap reinsurance and let insurers pass assessments along to policyholders. Everything was done at the behest of the industry. And the industry performed well through 2005.