We escaped the 2009 hurricane season, but Florida is still one storm away from severe financial risk. Consider, in a state with more than $2.1 trillion in property exposure...

• State-run Citizens Property Insurance Corporation (CPIC) has become Florida’s largest residential property insurer — an insurer that is more than $9 billion undercapitalized and which charges its 1 million policyholders rates that are not actuarially sound.

• The Florida Hurricane Catastrophe Fund (CAT Fund) faces a $4.2 billion shortfall should it have to make good on its promise to pay hurricane claims.

• Key financial rating agencies are watching Florida, looking to downgrade the ratings of insurance companies, as they recently have with State Farm and Allstate affiliates. As that happens, millions of homeowners may have insurance policies that do not qualify for their mortgages to be sold.

• Already owing nearly $5 billion to be repaid in hidden taxes, or insurance assessments, since 2005, Floridians might have to pay average annual hidden taxes of $1,440 or more for several years if a major storm or series of storms hit.

• Despite a 15% rate increase, State Farm, Florida’s largest private property insurer, has announced that it still must shed 125,000 of its 810,000 residential insurance policies statewide, just to stem its financial deterioration, and Florida’s Office of Insurance Regulation has acknowledged that there aren’t enough other private companies in Florida to appropriately fill the void. Additionally, Nationwide Insurance said in October that it is dropping 60,000 homeowners policies.

While the 2009 Legislature passed two measures in an attempt to address these problems, there is still much work to be done. House Bill 1495 (2009), which Governor Crist signed into law, will eventually reduce the CAT Fund’s exposure and increase CPIC’s rates to actuarially sound levels. Those changes will be phased-in over several years, leaving the state vulnerable in the interim while continuing to provide deeply discounted insurance to millions of property owners and shifting tens of billions of dollars of risk from a market-based private sector to taxpayers.

Furthermore, while not a panacea, the vetoed House Bill 1171 would have enabled Floridians to pay a higher than regulatory-approved property insurance rate for coverage with the insurer of their choice and the comfort of knowing that they could rely on a well-capitalized company to pay their claims in the event of a damaging storm. It is widely believed that such “consumer choice” legislation would have made Florida’s property insurance market more attractive to key large insurers like State Farm.

The bottom line — one major hurricane hit and Florida would still likely have to turn to the Federal government for assistance or face severe financial crisis.