With the prediction of three named storms still on the 2008 hurricane horizon, the news that Florida can’t afford to back insurers is less than good news. From Florida Trend:

Florida’s Inability to Borrow Spells Trouble for Catastrophe Fund

The global financial crisis threatens to unravel Florida’s property insurance system if a major hurricane hits during the last two months of this hurricane season. The reason is the system is based on a promise that the state can help cover claims after a major hurricane by borrowing large amounts of money. And in 2007, state legislators, looking to suppress any increases in insurance premiums, made the system even more reliant on borrowing money. The state forced insurers, by law, to do business with the state if the state’s product was the cheapest.

Insurers would pass on savings to consumers. The state promised to pay claims by bonding billions of dollars. The bonds would be repaid by assessments on Florida insurance policies, such as after the 2005 hurricanes. But with the financial markets in turmoil, the state can’t find investors willing to buy its bonds right now.