Hurricane Loss Mitigation Program
Section II: The Florida Hurricane Catastrophe Fund - Moving Toward Mitigation
In the 1999-2000 legislative session, the Legislature determined that there was a need to focus the
projects funded from the annual appropriation from the Florida Hurricane Catastrophe Fund. This led to the
development and passage of the Bill Williams Residential Safety Act, the Hurricane Loss Mitigation Program,
section 215.559, F.S., and the legislative mandate behind this report. Section 215.559, F.S. clearly directs
the Department to provide a full report and accounting of activities undertaken under this section and to
evaluate the activities. As this section has been in effect only since July 1, 2000, this six month time frame,
while reported on, does not provide a full picture of the use of the use of the Florida Hurricane Catastrophe
Fund and the direction of the Department. To provide a complete picture, it is important to look first at how
the funds appropriated through the Florida Hurricane Catastrophe Fund were used prior to the passage of
the Hurricane Loss Mitigation Program. Complete descriptions of the projects funded by the Department in
each fiscal year, including a full accounting of contract amounts, are included in the tables provided in
Appendix A.
In State Fiscal Year 1997-1998, the first year in which Florida Hurricane Catastrophe Fund resources
were directed to mitigation programs, the Department administered $1,290,000 in projects, not including
funds provided to the Department as match for disaster relief. The Department took a two track approach
in implementing these funds. Efforts focused on public outreach and developing the Residential
Construction Mitigation Program.
Recognizing the magnitude of educating people on the importance of protecting their homes from hurricane loss, the Department promoted and helped to underwrite various conferences throughout the state, including the Florida Homebuilders Association's Southeastern Builders Conference, the Florida Governor's Hurricane Conference, the Building Officials Association of Florida Conference, and the South Florida Hurricane Conference.
During this time period, the Department, using other, non-Florida Hurricane Catastrophe Fund resources, invested in the development of an innovative wind loss evaluation model for residential structures. The insurance industry is able to offer a rate reduction for seatbelts for a particular model car because they have the assurance that every car in the series is fundamentally the same. The rate reduction offered reflects the actuarially-supported difference in loss risk between the driver using the seatbelt and the driver not using the seatbelt. Offering premium rate reductions for hazard mitigation measures presents difficulty because, unlike cars, houses are neither built exactly the same nor always to the specifications or standards required. This is particularly true of homes of less recent construction. The wind loss inspection protocol and evaluative model developed by the Department was designed to help overcome this obstacle by generating a comprehensive database of the risks inherent from a wide ranging stock of housing. This database could be used by the insurance industry to make actuarially sound decisions on offering rate reductions for mitigation measures.
This wind loss model formed the foundation of the Department's Residential Construction Mitigation Program. The remaining funds from the 1997-1998 State Fiscal Year Florida Hurricane Catastrophe Fund appropriation were directed to support the Residential Construction Mitigation Program in Palm Beach, Broward, and Miami-Dade Counties. The pilot phase of this program offered randomly selected homeowners covered by the Florida Windstorm Underwriting Association with free wind loss inspections to identify the hazard mitigation upgrades or retrofits necessary to improve the survivability of their homes. The pilot phase provided interested homeowners from among this randomly selected group with up to $10,000 in a forgivable loan to implement the recommended mitigation measures outlined in the wind loss analysis. While the retrofits helped ensure that the few participating homes were made more disaster resistant, the value of the program was in the randomly selected housing data generated by the wind loss analyses. The intent of the Residential Construction Mitigation Program was from its onset to create actuarially sound justification for providing insurance premium rate reductions for homeowners taking specified loss reduction retrofit measures on their homes as proscribed by a structural analysis.
In an effort to link together the broad public education and outreach efforts with the Residential Construction Mitigation Program, the Department contracted with the Florida International University to support the development of the Homeowners Incentives Team, also known as the HIT Team. The mission of the Homeowners Incentives Team was to support mitigation as a public value by encouraging industry and government to offer a broad range of incentives for homeowners to choose to protect their residences against natural hazards. The Homeowners Incentives Team brought together representatives from associations and organizations belonging to the insurance, banking, mortgage and building industries as well as local, state and federal government to begin to investigate this issue.
In addition to these programmatic investments, the Department reserved approximately $95,000 to cover salaries, standard expenses, such as rent and travel, as well as the Department's administrative assessment.
The State Fiscal Year 1998-1999 saw the continuance of the Department's two track approach to mitigation, promoting public education while at the same time supporting the collection of critical wind analysis data from homes located in the most vulnerable portion of the state. In this year, the Department administered just over $5 million in mitigation projects. Again, the Department supported a series of conferences promoting hurricane mitigation and awareness, and developed public education materials including booklets and other outreach documents, as well as the popular Hurricane Special television broadcast. Voluntary wind analyses and structural retrofits continued at a rapid pace in Palm Beach, Broward, and Miami-Dade Counties, as well as in the City of Key West.
A highlight from the Florida Hurricane Catastrophe Fund 1998-1999 State Fiscal Year was the development and implementation of the Florida Coastal Monitoring Program. In collaboration with the Institute for Business and Home Safety, the insurance industry's non-profit arm for loss reduction advocacy, Florida International University and Clemson University, the Department installed monitoring devices in a series of homes along the southeastern coastline of the state. For the first time, researchers would be provided with the instrumentation necessary to analyze the impacts of hurricane force winds and storm surge stresses on residential structures as they occurred.
The Department reserved approximately $110,000 in State Fiscal Year 1998-1999 to cover salaries, expenses, and administrative assessments.
The State Fiscal Year 1999-2000, the final year in which the Department implemented Florida Hurricane Catastrophe Fund resources prior to the implementation of the Hurricane Loss Mitigation Program, was characterized by a maturing of the initiatives launched in the previous two fiscal years. The Department administered approximately $5 million in mitigation projects in this year.
To enhance its outreach efforts, the Department also supported the founding of the Florida Alliance for Safe Homes, or FLASH, a broad-based partnership of government, media, industry and consumer interests organized to provide a unified hazard mitigation message to the public. The Florida Alliance for Safe Homes stressed the importance of self reliance in mitigation, and, through the development of outreach materials, outlined a series of low cost, easy to implement measures to promote home safety and disaster loss reduction for a range of perils.
In this fiscal year, the Department continued to support the applied research initiatives of the State University System, partnering with the Florida International University, Florida State University, and the University of Florida on a range of projects. The Department contracted with Florida International University to take the lead in continuing the successes initiated by the Homeowners Incentives Team. The State University System played a lead role in refining the Residential Construction Mitigation Program by creating a loan screening criteria and a database of homes inspected and retrofitted under the program.
The Department transitioned from the pilot phase of the Residential Construction Mitigation Program, scaling back on its previous direct support of home retrofits through providing forgivable loans. The Department did underwrite the cost of hazard mitigation retrofits on a series of low to moderate income homes, providing funding to leverage local rehabilitation dollars being invested in the structures. The generation of wind analyses inspection data, however, remained the primary goal of the program. Florida Hurricane Catastrophe Fund resources were used to underwrite the cost of structural inspections and wind analyses on a range of homes in counties in the Tampa Bay Region.
One of the principal changes in the Department's implementation of the Residential Construction Mitigation Program related to how to encourage the homeowner to act upon the inspection data. The use of $10,000 forgivable loans was abandoned as an incentive to get homeowners to implement the kinds of mitigation improvements recommended by the structural inspection and wind loss analysis. The Department dedicated staff resources instead to identifying and marketing available loan products, both through Fannie Mae and other private lenders.
The State Fiscal Year 1999-2000 also marked the first emphasis placed on utilizing the Florida Hurricane Catastrophe Fund resources administered by the Department to better ensure the safety and security of mobile homes. The Department supported Tallahassee Community College in administering a mobile home retrofit program statewide. This program included free inspections and replacements of mobile home tie-downs. In addition, the Department provided funding to Pinellas County as well as the Florida Windstorm Underwriting Association to complete mobile home tie-down programs that had been previously initiated in selected mobile parks. This emphasis on mobile homes set the stage for the legislatively mandated funding of mobile homes as outlined in the Hurricane Loss Mitigation Program.
In State Fiscal Year 1999-2000, the Department reserved approximately $110,000 to cover salaries, expenses, and administrative assessments.
The funding from the Florida Hurricane Catastrophe Fund administered by the Department in the three years preceding the implementation of the Hurricane Loss Mitigation Program supported the types of activities now mandated in the statute. These activities include research, a special emphasis on the needs of mobile homeowners, and on programs administered by the Department designed to promote hazard mitigation.
Analyzing the research undertaken in the first three years of funding through the Florida Hurricane Catastrophe Fund, it is important to emphasize the groundbreaking nature of the wind loss evaluation modeling developed by the Department. Never before had this kind of data collection tool been available. By creating an actuarially sound justification for providing meaningful incentives to homeowners undertaking mitigation retrofits, the Department, in conjunction with the efforts of the Homeowners Incentives Team, made significant progress in creating a demand for hazard mitigation. The Department, as demonstrated by the wide range of projects undertaken during the three years prior to the Hurricane Loss Mitigation Program, is on the cutting edge of hazard mitigation nationally.
The third year of the funding of initiatives through the Florida Hurricane Catastrophe Fund, State Fiscal Year 1999-2000, marked the beginning of a focus on mobile home mitigation through supporting the free inspection and replacement of mobile home tie-downs in selected mobile home communities statewide. These initiatives respond to the need for timely inspection and repair of mobile home tie-downs which can loosen and rust over time. Mobile and manufactured homes provide a safe and affordable housing option for a significant number of Floridians.
The programs developed and implemented by the Department during the three year time period were varied. A strong emphasis was placed on the development and implementation of the Residential Construction Mitigation Program and on providing free home wind loss inspections to homeowners at highest risk of hurricane loss. While the initial pilot phase of the program included forgivable loans offered to randomly selected Florida Windstorm Underwriting Association policy holders to implement recommended retrofit techniques, the program evolved to market and support private sector and government supported loan options to finance these needed retrofit activities.
Underlying the program was the need to generate structural loss data. The data generated through this research was instrumental in the Florida Windstorm Underwriting Association's development of their classification plan. In the classification plan, homeowners taking proscribed mitigation measures save up to 50 percent on their insurance premiums. In a context where insurance premiums must rise to reflect actuarial realities, premium rate reductions based on retrofit activities help ensure that insurance remains affordable for all Floridians while, at the same time, their homes are made more disaster resistant.
The second area of concentration supported by the Department during the three year time period was education and outreach. While providing outreach through supporting conferences initially, the Department helped to underwrite the popular televised Hurricane Special, as well as the development of printed outreach materials. The Department's efforts at public education and outreach culminated in the creation of the Florida Alliance for Safe Homes, or FLASH. First established as a partnership under the direction of the Department in collaboration with the insurance industry and other industry, media and government partners, the Florida Alliance for Safe Homes now exists as an independent not-for-profit agency charged with providing Florida residents with important public safety information.
In summary, the use of allocations from the Florida Hurricane Catastrophe Fund have been instrumental in beginning the process of institutionalizing mitigation in the State of Florida. The Hurricane Loss Mitigation Program, however, provides the necessary focus to ensure that the successes realized in the first three years of Florida Hurricane Catastrophe Fund funded programs will be expanded and needs of the most affected stakeholders are met.