It’s been announced that the Florida Hurricane Catastrophe Fund (FHCF) will not be renewing its expiring $920 million private market reinsurance placement for 2020.
The 2019-2020 private reinsurance placement, which was led by reinsurers Swiss Re and RenaissanceRe, is scheduled to expire ahead of the 2020 Atlantic hurricane season.
However, in a recent statement, John Kuczwanski, Manager of External Affairs, Florida’s State Board of Administration (SBA), who administrate the FHCF including procuring its reinsurance program, has revealed that it will not participate in a private market placement this year.
Before the start of each hurricane season (officially June 1st), the FHCF’s financial condition is reviewed and the SBA evaluates all available opportunities in the global risk transfer and financial markets that might assist the FHCF’s ability to pay claims.
Kuczwanski notes that since 2015, there’s been ample private market capital and significant risk transfer capacity, which has enabled the FHCF to participate in the private market without lowering the amount of capacity available to direct writers in Florida.
However, capital is now less abundant that in prior years, explains Kuczwanski. “After evaluation of this market, and in collaboration with our trusted consultants, the State Board of Administration (SBA) has decided not to participate in a private reinsurance placement this year. The SBA will reevaluate risk transfer within its capital structure next year.”
He adds that despite the decision not to renew the expiring $920 million catastrophe reinsurance program, the FHCF remains in a strong financial position with $12.3 billion in liquid resources available to pay claims for the upcoming Atlantic hurricane season. Additionally, Kuczwanski notes that the FHCF will seek other opportunities to optimise its capital structure and maximise claims paying ability.
The announcement points to a tight Florida marketplace with levels of available capital seemingly in less abundance than in prior years. Reinsurance market dynamics continue to evolve as the mid-year renewals near, against a backdrop of consecutive heavy loss years and declining profits, and the uncertain impacts of the COVID-19 pandemic.