Florida Hurricane Catastrophe Fund could see $10B in losses from Hurricane Ian

TALLAHASSEE, Fla. – The Florida Hurricane Catastrophe Fund, a state program that gives vital backup protection to property insurers, is estimated to have $10 billion in losses from Hurricane Ian, officers stated Wednesday.

The program generally often known as the “Cat Fund” will have the ability to deal with Ian’s monetary hit, although it is going to go into the 2023 hurricane season with lowered quantities of money.

“We feel very confident that we can cover our obligations from Ian because going into this year we had a very healthy cash balance,” Gina Wilson, the fund’s chief working officer, stated throughout a gathering of the Florida Hurricane Catastrophe Fund Advisory Council.

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The Cat Fund offers comparatively cheap reinsurance to carriers as a manner to assist stabilize the property insurance coverage market. Carriers additionally purchase personal reinsurance, which serves as backup protection to assist pay claims in conditions comparable to hurricanes.

Under state regulation, the utmost potential legal responsibility of the Cat Fund this yr is $17 billion. The fund went into the hurricane season with $15.8 billion in money and proceeds of what are often known as “pre-event” bonds.

Estimates of general business losses from Hurricane Ian have diversified however are in the tens of billions of {dollars}. The agency Raymond James, which serves as a monetary adviser to the Cat Fund, introduced a report Wednesday that stated a consulting actuary estimated the Cat Fund’s share of losses at $4 billion to $12 billion and projected a “conservative point estimate of $10 billion.”

“There is significant uncertainty regarding the ultimate loss amount. as losses are just beginning to develop,” the report stated. “Estimates are based on the output of models and are subject to significant uncertainty; therefore, there is no guarantee that actual losses will fall within the projected range.”

But Wilson stated the fund has acquired preliminary information that a minimum of 82 firms anticipate to get Cat Fund reimbursements, with 28 drawing their most quantities. By comparability, she stated, 9 carriers acquired most quantities after Hurricane Irma in 2017.

Ian made landfall Sept. 28 in Lee and Charlotte counties as a Category 4 storm earlier than crossing the state. Data posted on the Florida Office of Insurance Regulation web site Wednesday stated 410,251 residential property harm claims had been reported from the storm.

While the Cat Fund expects to have the ability to deal with Ian losses, it is going to go into the 2023 hurricane season with considerably much less cash than it in any other case would have anticipated.

The Raymond James report stated the fund is projected to have “liquid resources” of about $7.4 billion. That features a projected $2.3 billion in money left on the finish of this yr, $1.6 billion in premiums paid by carriers and funding revenue and $3.5 billion in pre-event bond proceeds. If crucial, the report stated, the fund additionally would have the ability to situation as much as $8.4 billion in bonds after a storm.

Even earlier than Hurricane Ian, the personal reinsurance market was tight in Florida, contributing to widespread monetary issues for insurers. Lawmakers throughout a May particular legislative session authorized spending $2 billion on a program to offer one other “layer” of reinsurance protection to carriers.

But Ian has raised considerations that personal reinsurance will turn into extra expensive and tougher to search out for carriers. As an instance, the reinsurance big Swiss Re final week estimated its claims from Ian at $1.3 billion.

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