Taking his chances: David S. Daniels decided to self-insure instead of paying for windstorm coverage that would have more than quadrupled his premium.

When David S. Daniels and his partners at Bayshore Properties of St. Petersburg bought a historic building in downtown's McNulty Station this September, they knew they'd be in for a windstorminsurance wallop. But they had no idea how big a whack they faced. Bayshore is used to paying between 50 cents and $1 a square foot to completely insure its commercial properties. For McNulty Station, their carrier demanded $4 a square foot for windstorm alone.

"This is a building that's been standing for nearly 100 years that's very much protected from wind because it's surrounded by other buildings," says Daniels. "We analyzed the risk and determined we should self-insure."

Self-insurance -- going bare -- is increasingly common among Florida business owners who either can't afford skyrocketing windstorm insurance coverage or can't find it at any price. What's different about Bayshore Properties' deal is that Daniels' mortgage lender signed off on it. Daniels, also a director at St. Petersburg's Signature Bank, approached three lenders with a proposal to sock away the $75,000 he would have spent on windstorm as collateral in case wind damage. Only one of those lenders agreed to finance the McNulty building under Daniels' terms.

Bankers don't like to advertise the possibility, but they say they've been handling such requests on a case-by-case basis. "The regulators frown upon this; they would like every property insured for obvious reasons -- because you don't want to see a catastrophic storm and then bank failures," says Alex Sanchez, CEO at the Florida Bankers Association. "That said, bankers want to keep their good customers, and some are allowing it as long as they can document their reasoning in the loan file."

Many large institutions with widespread operations have found that self-insurance makes sense. Wal-Mart, for example, announced earlier this year it would self-insure for windstorm damage after insurers hiked the company's rates in the wake of Hurricane Katrina. But it's much riskier for small businesses. For those that require less than $1 million in coverage, there may be a better option. This fall, Gov. Jeb Bush and the Cabinet approved an emergency order establishing a commercial property and casualty joint underwriting association for small businesses unable to obtain insurance. The PCJUA could not be launched without a minimum of 100 applicants, 80% of whom had to prove they couldn't get coverage. The trigger was reached three days after the rule passed. In its first month, from Sept. 15 through Oct. 15, the PCJUA wrote 76 policies covering 120 structures for an average rate of $1.73 a square foot. The Florida Bankers Association is among the many business groups pushing for increased relief in the 2007 legislative session.

Daniels is the first to point out self-insurance may not be right for most businesses. But neither, he says, is paying out-of-control windstorm rates. "It very much depends upon the banker, the client, the building and the location," he says. "You're not going to see this happen out on the beach."