News & Updates


Storm Losses Increase FHCF Reliance on Bonding

Storm Losses Increase FHCF Reliance on Bonding

The Florida Hurricane Catastrophe Fund (FHCF) projects that it would be able to meet its maximum single-season reimbursement obligation of $17 billion if the need arises. However, hurricane losses in recent years have reduced the FHCF’s available cash, increasing its anticipated reliance on post-event bonding.

For the 2023-24 FHCF contract year, the insurance industry retains an initial aggregate $9.1 billion in hurricane losses. The FHCF’s maximum obligation to all insurers then is $17 billion. To reimburse insurers at this level, the FHCF first would rely on its projected $4.2 billion liquid fund balance. The FHCF also has $3.5 billion in pre-event note proceeds available. This would leave the FHCF with a post-event borrowing need of $9.3 billion.

Twice each year, the FHCF estimates the amount of post-event bonds it could issue 0-12 months and 12-24 months after a triggering event. Most recently, the FHCF determined it could issue $7.8 billion in bonds within 12 months of an event. This would leave $1.5 billion in bonds to be issued 12-24 months after an event, which is within the FHCF’s estimated ability. The FHCF likely would need to levy an assessment of approximately 1% – 1.8% depending on the duration and the interest rate.

Although the FHCF continues to anticipate meeting its maximum contracted single-season obligations, the most significant impact on the Florida market would be felt in a subsequent season. Under current conditions, one or more events depleting the FHCF in an initial season would result in the FHCF’s having only about $7 billion in capacity available for a subsequent season. This would leave a $10 billion shortfall in expected capacity available to insurers and create considerable strain on the market. Fortunately, as the 2023-24 hurricane season nears its end, the FHCF stands to benefit from accumulating another year’s premiums and potentially future improvements in the interest rate environment.