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Florida’s $50B masquerade party

Much has been written about the economic realities all Floridians will face once the next big hurricane hits our shores. This is a certainty and not a matter of if but when.

We also have all watched with interest as Bernard Madoff was sentenced to go to federal prison for the rest of his life because of bilking his investors out of more than $50 billion, the biggest investment Ponzi scheme in history. Some may ask how this could have happened but the truth is we are all susceptible to loss if we choose to believe an illusion.

Madoff’s illusions to his clients were the statements he sent saying they had money invested but the truth showed there was nothing there. Gov. Charlie Crist is responsible for a similar illusion but the statements he is allowing to go out are the insurance coverage declaration pages of Florida’s carriers. All of them are depending on an underfunded Florida Hurricane Catastrophe Fund to back up the money they will have to pay out. The coverage limits of Florida policyholders represent real money at risk and when the winds blow, will have to be paid. However, there is not anywhere near the amount needed in the fund to pay the claims that will eventually come.

We want to believe otherwise but the truth reveals as soon as the next big one hits we are in a $50 billion financial hole with no way out except for the most massive federal bailout of any state in history. Ask anyone if this makes much sense as a business plan and you’ll get laughed out of town, but somehow this preposterous regulatory mismanagement of our state’s insurance industry gets a free pass. Maybe the blinders can hide our eyes to the truth for one more hurricane season but we know the power of the storms and we clearly see the frailty of our economy and a combination of the two spells financial doom for Florida as we know it.

Here is the truth about the money. We have the Florida Hurricane Catastrophe Fund that has a $28 billion exposure, however, only $4 billion in the bank of its own money. The Cat fund people will tell you they have $7 to $8 billion in cash and while true, all but $4 billion is borrowed and is money that has to be paid back to bond holders. It is the same with the other $20 billion they will have to borrow when Mother Nature comes calling again. There is no one out there who would lend us the money in the first place and even if they did, how are we supposed to pay it back? Our economy will be in shambles and with most all claims getting federal “assistance,” how likely is that to run smoothly?

The charade of the “people’s governor” is beginning to be unmasked by the media and understood by the masses. We are finally beginning to see our “emperor” is wearing no clothes and it does not matter how much we want to believe he does. It’s time for all Floridians to wake up to the reality that our state is in a $50 billion hole and there is no way out unless we begin to take responsibility for requiring our legislators and governor return us to the stable footing of a sound insurance mechanism. We need to retreat from the Madoff theme and allow for a viable market to assert itself, a market that truly does have the money behind the numbers on a declarations page.

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