Should Florida State invest in catastrophe bonds?

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The Florida Senate has unveiled a plan to cap property rates for another year for the customers of Citizens Property Insurance (the state run residential insurer). At the same time they want to reduce the state hurricane catastrophe fund by $3 billion to mitigate their own risks should a major hurricane hit.

Obviously, should the state cat fund be reduced, it’s likely that other residential insurers will have to turn to more expensive forms of reinsurance (or alternatives such as cat bonds) and that would push up rates for homeowners (by as much as 3% it’s estimated).

Is there a place for the state to begin sponsoring it’s own catastrophe bonds in place of the cat fund? Or could this mean an increase in Florida windstorm cat bonds as the other residential insurers try to shore up their coverage?

More from the Herald Tribune.

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