The state of Florida has faced seven hurricanes in the last two years resulting in millions of dollars in insurance payouts. These payouts are exerting an upward pressure on insurance premiums in the state. It has been estimated that payouts resulting from natural disasters in 2005 amounted to a staggering $56.8 billion. Florida lawmakers are proposing that a national catastrophe fund that provides relief to insurers in case of such natural disasters. They are pushing for a national legislation that is likely to take at least two years to pass. Other landlocked states, however, do not want to foot the bill for costal Florida.
Incidentally, Florida is the only state that had set up a state calamity fund in 1993 after Hurricane Andrew to provide relief to insurers. However, the recent wave of destruction has wiped out that fund. A catastrophe fund will also keep homeowner insurance premiums from shooting up as insurers will be able to get assistance from the fund and will not need to factor the excessive payouts into future premiums.