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Each new day of the financial crisis brings more shocking news. This week was no exception as executives from General Motors, Ford, and Chrysler flew to Washington on their corporate jets to beg for their share of the $700 billion Troubled Asset Relief Program.

In a shameless display of arrogance and entitlement, leaders of what used to be "best in class" companies begged for billions of dollars with their tin cups outstretched in front of the US Congress. Before the Big Three ever arrived in Washington, billions had already been committed to AIG and some of the largest financial institutions in the country.

During this financial meltdown we're seeing something we never expected to see in our lives - broken promises from major corporations and government institutions on an unprecedented scale. We've reached a point where even large companies and large states like Florida can't meet their obligations using the bond markets.

If you are a Florida home insurance consumer, your biggest asset is now at risk during the financial crisis - your Florida home.

Can you name a more sacred promise than the one a home insurance company makes to you when it takes your money and agrees to insure your home?

When you buy homeowners insurance in Florida the insurance company is promising you fast and fair payment of your claim. Florida insurance companies buy reinsurance to help them make good on this promise to you. Reinsurance is backup coverage that insurance companies buy to help protect themselves from big losses above certain levels.

The Florida Hurricane Catastrophe Fund was formed as a way to help stabilize the Florida home insurance market after Hurricane Andrew caused billions in damage to Florida in 1992. By offering reinsurance at affordable rates, the fund helped to make homeowners insurance available and affordable for many years.

That all changed after the Florida hurricanes of 2004 and 2005 when Florida home insurance became overpriced and hard to find again.

The Florida legislature responded to the Florida home insurance crisis by voting in 2007 to expand the reinsurance sold by the Cat Fund by $12 billion - raising its total risk to a total of $28 billion. Florida home insurance companies were required to purchase this additional reinsurance from the state and to pass along the savings realized on reinsurance to home owners.

As a Florida homeowner, you didn't get the rate reductions that this law was supposed to provide. Your rate cuts never came close to the 24% predicted when the legislation passed. And to make things worse, the Florida Cat Fund took on an additional $12 billion in risk.

Now the Florida Catastrophe Fund has told us that the frozen bond markets won't be an acceptable source to raise the cash it needs to meet its commitments to the insurance companies after a major Florida hurricane. It recently estimated that it could pay out $13 billion over the next twelve months - That's $15 billion less than the $28 billion it is on the hook to pay!

Where does this leave you as a Florida home insurance consumer?

You didn't get the rate relief you expected and your state took on financial obligations that it has no hope of paying.

You are at risk if Florida experiences a major hurricane in the next year. Once the losses of your Florida home insurance company exceed certain levels, your company will ask the Florida Cat Fund to reimburse them in order to pay your claim. Since the Florida Cat Fund is short on cash, you might have a long delay in getting your claim paid.


The promise to pay your Florida home insurance claim has never been more at risk than it is today.

Now that you know that the Florida Cat Fund can't meet its obligations, let's look at the idea of a National Hurricane Catastrophe Fund that some in Florida have been pushing in Washington for many years. This National Cat fund would offer an additional layer of loss protection above and beyond the obligations of the Florida Cat Fund.

In theory a National Cat Fund would be funded by setting aside a portion of insurance premiums paid by policyholders in the states participating in the fund. A National Cat Fund would be a separate fund that would earn interest and grow during the years when there aren't any claims.

Supporters claim that no taxpayer money would be needed to sustain a National Cat Fund. History tells us there would be storms so large that federal tax dollars would have to be used to cover major losses.

And everyone knows that the federal government can't keep its funds separate. Just ask someone in Washington to show you the billions that are supposed to be in the Social Security Trust Fund. You won't be shown any cash - just a drawer full of T-Bills and IOU's.

Now that the Big Three Auto makers and other shameless Fortune 500 companies have beaten Florida to the punch in Washington, it is very unlikely that a National Hurricane Catastrophe Fund will pass anytime soon. The red ink in Washington will make even President Elect Obama shy away from any additional federal obligations. So don't look to the federal government to help keep the promise that was made to pay your Florida home insurance claim.

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