A tax proposal headed to Congress could make homeownership more expensive in Florida because experts say it will increase insurance costs for consumers. A provision buried in the proposal has been labeled the “hurricane tax” because it would hike taxes on overseas reinsurers and would particularly impact states in hurricane-prone regions. Those reinsurance companies are the financial backstop to a number of insurance companies that underwrite homeowner policies in Florida, and would ultimately increase the cost of owning a home in the Sunshine State.
The so-called “hurricane tax” is just one part of a controversial “global tax” proposal being pushed by the administration of President Joe Biden, and it has the backing of some Democrats in Congress, but as word spreads about the proposal’s potential impact, a growing number of advocacy groups have started to voice concerns.
Many Floridians are already projected to see their insurance premiums increase this year as recent storms and expanded regulatory measures have lead to higher homeownership costs. If the hurricane tax becomes law, experts say there would be an even higher cost for families, particularly those unable to afford necessary insurance in the event of a storm.
The tax proposal would affect both regular homeowners insurance and private mortgage insurance, or PMI, which is a type of mortgage insurance added to many conventional loans to protect the lender against default. PMI is most often paid by first-time homeowners or those unable to put a 20% down payment on a home.
Both ways, homeowners could end up paying more.
The Florida Chamber of Commerce is deeply concerned since Florida’s insurance industry relies on a stable international insurance market to provide reinsurance protections in the event of a catastrophic storm.
“This will threaten Florida’s real estate-driven economy and impact Florida businesses, consumers, as well as current and future homeowners when Florida already has the highest insurance rates in the country,” said Chamber Executive Vice President David Hart in a letter to U.S. Sen. Marco Rubio. “This type of misguided tax would be paid by Floridians, not just in the form of higher insurance costs, but in the form of higher costs for everyday goods and services.”
Similarly, the Florida Association of Insurance Agents (FAIA) warned that Florida’s insurance market is in a vulnerable position as premiums continue to soar.
“My growing concern is that if President Biden’s tax proposal becomes law, we will see insurance companies seek further rate increases from state regulators to compensate for the increase in costs,” the association said in a letter to policymakers. “Perhaps even more concerning is that some homeowners may choose to forgo insurance due to rising costs, putting themselves at an even greater risk for catastrophic loss.”
FAIA also cautioned that the provision could lead more Floridians to Citizens Property Insurance, which is supposed to be the state’s insurer of last resort, offering policy protection when other insurers won’t because the risk is too great. But Citizens is already at or near capacity, meaning Florida taxpayers could soon be on the hook to cover even more of those costs.
The Florida State Hispanic Chamber of Commerce, the Federal Association for Insurance Reform, and the Florida Alliance for Consumers and Taxpayers have also joined forces in opposition to the proposal. They are cautioning Florida’s Congressional Delegation that a “hurricane tax” would limit the insurance industry’s capacity and create more risk in the market, which would ultimately create higher costs for homeowners and renters.