News & Updates


FHCF Report Describes Impact of 2009 Legislative Changes

By: David Yon


The Florida Hurricane Catastrophe Fund (FHCF) issued a report at the end of July describing the impact of the 2009 legislative changes on the FHCF capacity and the coverage selections made by insurers.  The report identified the following changes to be implemented for this year from HB 1495.

  • Phase out of the Temporary Increase in Coverage Limit (TICL) over a six year period.  This top layer of the FHCF was reduced by $2 billion (from $12 to $10 billion) for the 2009-2010 year.
  • An increase in the cost of TICL coverage intended to bring the cost of this coverage in line with the private reinsurance market.  For 2009-2010 this cost was increased by a factor of 2.
  • The FHCF was directed to implement a cash build up factor in its premium charge.  For 2009-2010 this factor was to be 5% of premium.

The report stated that the 2009 legislative changes have resulted in companies selecting less FHCF coverage.  In fact, the FHCF estimates approximately $6.4 billion of capacity has moved from the FHCF to the private market (primarily the reductions in TICL layer coverage offered and selected).  Approximately $5.5 of the remaining $10 billion available in the TICL layer was purchased by insurers with the largest purchaser of TICL coverage being Citizens (over 60%).  The report also included a list of the largest private insurers to purchase coverage in the TICL layer. 

For the 2009-2010 year, the FCHF report states that the FHCF maximum potential capacity based on the coverage selected by insurers is $23.173 billion.  If insurers had selected the maximum available this amount would have been $28.275 billion.  The reduced coverage amounts have helped reduce the estimated overall FHCF claims paying capacity shortfall to $7,173 billion, down from an estimated shortfall on January 1, of $18.5 billion.   The reduction in the shortfall was identified as coming from a reduction in statutorily available coverage ($2 billion), reduced coverage selected ($4.4 billion), increased bonding capacity ($5 billion) and increased premium sources ($.5 billion). 

If you would like a copy of the report please visit the Resources section of our website or contact David Yon or any of our insurance professionals.