The Florida Hurricane Catastrophe Fund (FHCF) expects $17 billion in maximum potential liability for the contract year June 1, 2023 to May 31, 2024.
This consists of an estimated total liquid resources of approximately $7.2 billion, consisting of projected year-end fund balance of $3.7 billion and pre-event bond proceeds of $3.5 billion.
Additional financing will be necessary as the projected available total liquid resources of $7.2 billion fall short by $9.8 billion compared to the maximum potential liability, FHCF noted.
Paragon Strategic Solutions Inc., the consulting actuary for the FHCF, has provided estimates indicating that the FHCF’s portion of losses related to Hurricane Ian is expected to range between $6 billion and $13 billion, with a projected ultimate loss amount of $10 billion.
However, due to losses being in the early stages of development, there is considerable uncertainty surrounding the final loss amount. These estimates rely on model outputs and are subject to significant uncertainty, meaning that the actual losses may not necessarily fall within the projected range, FHCF explained.
The Hurricane Ian loss estimates, suggests that a repeat of a hurricane that size would need post-event bonding to be issued for a portion of their payments.
If it issues post-event bonds it would likely need to levy emergency assessments on all property and casualty insurance lines in Florida except workers’ compensation, medical malpractice, federal flood, and accident and health lines.
The global reinsurance markets, particularly in Florida, have been facing increasingly challenging conditions since 2020, and this trend has persisted into 2023. Florida’s insurance market has witnessed a significant decline in reinsurance capacity as a result.
The FHCF’s average coverage for 2023 has risen to around 87.4% due to higher reinsurance prices and limited capacity in the Florida market.
“Due to Hurricane Ian losses and global macroeconomic factors, the global reinsurance markets are expected to remain hard, which will further reduce the reinsurance capacity for the Florida market.”
