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The Hurricane Catastrophe fund could cover up to twelve billion in losses, but it faces even bigger expenses if there was a very large storm. Current economic conditions make it difficult to borrow, so the fund says it wants to shift the risk to private insurers. Director Jack Nicholson told the Governor and Cabinet that shedding as much as five billion in risk could raise average homeowners rates by ten percent over the next seven years.

“What you’ve got is a tremendous risk,” says Nicholson, who explained it with this analogy  ”For example, if you had a car, and somebody said your brakes are bad, your front end needs an alignment, your tires are bald, it’s going to cost you a thousand dollars to get it fixed. You’re going on a long trip. The responsible thing to do is fix your car. that’s the situation we have., We have an insurance system that has a problem.”

The plan would result in higher rates for average homeowners because private insurers would have to purchase more re-insurance from private sources to replace funding from the Catastrophic fund.