Hurricane Charlie (The Republican Barney Frank)

CHARLIE CRIST(WSJ)   Florida Governor Charlie Crist is running for the U.S. Senate next year, and we wonder if one reason is that he doesn’t want to be in Tallahassee when the next hurricane hits his state. His veto of a hurricane insurance reform bill last week all but guarantees a state disaster on top of any wrought by Mother Nature.

The bill would have trimmed the cost of a state-run enterprise that insures homeowners against storm damage. The program has an $18 billion unfunded liability and has taxpayers on the line for tens of billions in property losses from the next major hurricane. The Republican legislature tried to reduce those future losses, but Mr. Crist sounded like Barney Frank rolling the dice on Fannie Mae in declaring there’s nothing to worry about.

By way of background, two years ago Mr. Crist gave a big gift to coastal property owners by converting the state of Florida into one of the world’s largest property insurers. The Citizens Property Insurance Corporation provides below market-rate insurance policies directly to homeowners. Meanwhile, the Florida Hurricane Catastrophe Fund (CAT) regulates how much private insurers can charge homeowners and requires companies to purchase low-cost reinsurance from the government. Mr. Crist didn’t invent these programs, but he vastly expanded their reach — to about one million policies today. He transformed Citizens from insurer of last to first resort.

Here’s the problem: This system isn’t even within a coastal mile of being actuarially sound. The state government acknowledges that in many high-storm risk areas the premiums are from 35% to 65% below what is needed to cover potential claims. That subsidy has made Mr. Crist popular with many coastal residents even as the state plays Russian roulette with the weather.

The reform, which passed with wide margins, would have allowed large private insurers to compete with Citizens and charge whatever premiums they wish. This would give homeowners a wider range of choices, and it would let private insurers spread hurricane risk around the world through reinsurance. The big and well-capitalized insurers — including Allstate, Nationwide and most recently State Farm — have either curtailed operations or withdrawn from the Sunshine State because they can’t make money charging subsidized rates. The companies could be bailed out under the CAT reinsurance program, but the fund may run out of money when a big one hits.

Mr. Crist and the media portrayed the reform as a giveway to the big insurers, and the Governor claims people can’t afford “large and unpredictable” increases in premiums. The truth is large increases are precisely what is sometimes needed to cover the risk of living on coastal property. Mr. Crist’s program makes the long-term losses much more severe because cut-rate insurance has encouraged overbuilding in coastal areas that are historically in the path of hurricanes. “We are one major hurricane away from an economic disaster in this state,” says House bill sponsor William Proctor.

Mr. Crist is also pushing a federal disaster-insurance fund, probably because he knows the risks he’s taking and wants all American taxpayers to bail out his Florida schemes when future hurricanes hit. Meantime, he continues to perpetuate the myth that Florida property owners can have billions of dollars of subsidized insurance at little expense or risk. It’s this kind of something-for-nothing economics that gave us the debacle of Fannie Mae. With that philosophy, Mr. Crist would feel right at home in Washington.

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