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FHCF Advisory Council to Consider Cat Fund Capacity

FHCF Advisory Council to Consider Cat Fund Capacity

The Advisory Council of the Florida Hurricane Catastrophe Fund meets October 18, 2011, to consider the most recent analysis of the FHCF’s claims-paying capacity.  The FHCF’s ability to reimburse participating insurers for covered losses consists of a combination of its cash on hand and its ability to issue bonds.  By law, the State Board of Administration (which administers the FHCF) publishes an estimate of the FHCF’s claims-paying capacity twice each year.

Throughout its history, the FHCF has projected that it would be able to meet its obligations under the mandatory layer of the coverage it offers.  However, the legislature in 2007 expanded the FHCF by allowing an optional temporary layer, stretching the FHCF’s potential claims-paying ability beyond its available resources (if insurers were to purchase the full amount of the coverage, which has not been the case).

More recently, however, Jack Nicholson of the FHCF has been cautioning that global financial market conditions could threaten the FHCF’s ability to meet even its mandatory obligations.  Nicholson therefore has proposed that the legislature gradually reduce the size of the FHCF and increase its retentions and copays.  Nicholson wants the FHCF’s ability to meet its obligations under the mandatory layer to be assured rather than hoped for.

The Advisory Council’s upcoming estimate of the FHCF’s claims-paying ability should provide interesting insight into the impact of current financial conditions on the FHCF.