After Jeb Bush had seen the eighth hurricane hit Florida in the span of 15 months, he floated a controversial idea to his brother, the president. It was about a federal program to help storm-prone states handle their growing disaster losses.

Florida at the time was reeling from the hurricane seasons of 2004-05 that caused $150 billion in economic losses nationwide. In little more than a year, four of the six costliest storms to ever hit the United States had made landfall in Florida.

The destruction pushed claims into the state's debt-ridden public hurricane insurance program as private insurers retreated from the threat of rising coastal hazards. As a result, the state's exposure to financial loss soared to more than $150 billion.

Jeb Bush

So as the storm season of 2006 got underway, then-Gov. Bush (R) talked with President George W. Bush about a federal program that would financially protect Florida and other states from losses related to mega-events, according to an email Bush made public under Florida law.

"You have peaked [sic] the President's interest," Maggie Grant, a member of the White House's Office of Intergovernmental Affairs, wrote to Gov. Bush on the evening of Sept. 26, 2006.

She asked the governor if they could discuss the topic in greater detail, noting that she and Al Hubbard, the president's top economic adviser, were tasked with putting "a paper together" for the president.

The governor responded 4 ½ hours later, at 11:03 p.m.: "I will call you tomorrow."

It's unclear if the paper was ever written. Hubbard declined to be interviewed and didn't respond to written questions about the governor's request. The president's decision was less ambiguous. His administration did not enact a federal backstop.


The episode shows that Jeb Bush's governorship was a dicey period featuring severe natural disasters. During it, he oversaw the creation of Citizens Property Insurance Corp., a public program that at the time ballooned into the state's largest insurer despite warnings from the insurance industry that its suppressed prices were exposing the public to debt and driving out private competition.

A lesson in what big government shouldn't do

Now, as Bush enters a tangled presidential primary race, some observers suspect his record on disaster policies could become a target for conservative candidates who see an opportunity to burnish their private market credentials by attacking Bush's effort to expand the role of federal and state government programs.

Eli Lehrer, president of the conservative R Street Institute and an insurance expert, described Bush's pursuit of a national backstop as the kind of populist promise made by many politicians, even though success is unlikely. Lehrer opposes the idea but defended Bush's record overall.

"Of course you want that," he said. "What governor of a state that's a low-lying peninsula jutting out into the Atlantic wouldn't want the federal government to pick up a fair portion of its insurance costs?"

Bush isn't alone. In Florida, where electoral votes might be more important than storms, other Republicans have called for expansive government programs to buttress the state's ever-developing coastline from the shock of high insurance rates in the private sector.

In 2008, Rudy Giuliani pressed Mitt Romney about his position on a national backstop during a primary debate in Boca Raton. Romney responded by saying it "makes a lot of sense," as long as people in Iowa don't have to subsidize coastal residents, because "that doesn't make a lot of sense."

That's a long-standing problem for supporters of a federal program. The idea hinges on Washington, D.C., collecting premium payments from state insurance programs. But few states face the level of risk that threatens Florida, so there's little incentive for inland states to pay premiums into a national program that could be dominated by coastal hazards.

Tom Gallagher, the former insurance commissioner of Florida, remembers hearing that argument repeatedly. He tried for years to persuade members of Congress to support a national backstop. In the end, it was a deflating experience.

"You get so much pushback, you start realizing, 'Man, this mountain may not get climbed,'" he said in an interview.

Bill McCollum, a former Republican Florida congressman, successfully steered a national catastrophe bill through the House in the 1990s. The Senate never took it up. But he still thinks it's a good idea. It could increase confidence among private insurers to expand their coverage in high-risk areas, McCollum said, and it could promote economic activity in the state.

"The conservative thing to do is to have a backup plan and only do it for the very large [storms]," he said in an interview. "None of the storms during Bush's tenure would have qualified."

State programs also expanded during Bush's governorship, which lasted from 1999 through 2006. The largest of those is Citizens Property Insurance Corp., a public insurer that Bush signed into law in 2002 when he merged two existing programs. The move was widely seen as an effort to enhance operating efficiency; it allowed the program to be exempt from paying federal taxes.

What happens when insurance rates are suppressed?

But the creation of Citizens also offset a 96 percent rate hike approved for the Florida Windstorm Underwriting Association, which at the time was about $2 billion in debt. The move resulted in the "nullification" of those increases and capped future hikes at between 20 to 40 percent, according to an analysis by state Senate staff.

That appears to mark the beginning of what critics say is an unwise set of policies that suppressed public insurance rates. The result, they say, is to apply pressure on private companies to keep rates low or lose customers to the public program. A few years later, many companies stopped writing coastal homeowners insurance in Florida.

Financial center damage

"It was warned countless times that its rates were inadequate," Robert Hartwig, president and chief economist of the Insurance Information Institute, said of Citizens. "And the state was warned that major hurricanes would occur and would probably exacerbate the problem. That's exactly what happened."

Four years after Bush signed the program into law, Citizens more than doubled in size. Policyholders reached 1.3 million in 2006, as homeowners saw private prices spike after the coast was pounded by violent storms. By then, Citizens was more than $1.5 billion in debt.

Most observers say the worst was yet to come, under Bush's successor, Gov. Charlie Crist. Crist in 2007 froze Citizens' rates at 2006 levels and softened its eligibility rules.

Bush, on the other hand, signed insurance legislation before leaving office in 2006 that was largely celebrated by conservative observers. Among the reforms was funding for mitigation programs, which help homeowners strengthen their houses against damage while receiving insurance discounts.

"The fundamental basics of Bush's reforms were good insurance policy, environmentally conscious and free-market-oriented," Lehrer said.

Today, Florida is more prepared for the next storm. Citizens has drastically cut the number of its policyholders from a high of 1.3 million in 2007 to 591,000 now. But experts say that has little to do with state politics. The driver is an absence of landfall hurricanes. The state hasn't been hit by a major storm since Hurricane Wilma struck in October 2005.