Actuarial Notes

Florida Hurricane Catastrophe Fund 2024 Annual Report

By State Board of Administration of Florida · 2024

Study guide: Exam 6U

The annual report of the Florida Hurricane Catastrophe Fund (FHCF), a state trust fund that reimburses residential property insurers for a portion of their Florida catastrophic hurricane losses, for the calendar year ending December 31, 2024. It gives the financial status and operational activities of the FHCF during the year, along with background on the fund and its performance over the years.

On the syllabus

  • Exam 6U — objectives B1–B3; pp. 4–5, 7 and 10–11 (the content outline cites the 2024 report as an online publication).

Executive Message

  • The 2024 hurricane season had 18 named storms, five of them major hurricanes, three of which made landfall in Florida; the FHCF's actuaries projected its total incurred loss at 10 million for Hurricane Helene and 3.5 billion for Hurricane Milton as of December 31, 2024.

Mission

  • Contract Year 2024-2025 Key Data

What is the Florida Hurricane Catastrophe Fund

  • The FHCF is a state trust fund that provides reimbursement to residential property insurers for a portion of their Florida catastrophic hurricane losses.
  • After Hurricane Andrew in August 1992, which caused over $15 billion in insured losses and at least 11 insurer insolvencies, the Florida Legislature created the FHCF to operate exclusively for the purpose of protecting and advancing the state's interest in maintaining insurance capacity.
  • Its coverage is similar to private reinsurance, and it can charge less since its rates include no profit factor or risk load and it is exempt from federal taxes.

How Does the FHCF Work?

  • Participation is mandatory for Florida residential property insurers, except those with Florida exposures below a de minimis threshold.
  • The FHCF is designed to be self-supporting except in extraordinary circumstances, charging each insurer an actuarially-indicated premium; when its cash balance is insufficient it can rely on revenue bonds backed by assessments on most types of Florida property and casualty insurance premiums.
  • It covers a percentage of the insurer's hurricane losses in excess of the insurer's retention, up to a maximum payout; the coverage percentage is 90, 75 or 45 percent, as selected by the insurer.
  • FHCF Operational Responsibilities

Financial Resources

Participation

  • Under the reimbursement contract, which runs from June 1 through May 31 of the following year, the FHCF reimburses a percentage of the insurer's residential losses from each hurricane in excess of the insurer's retention, plus a 10% allowance for loss adjustment expense, up to a limit reflecting the insurer's share of the FHCF's claims-paying capacity, not to exceed its share of the statutory maximum obligation.
  • Aggregate industry retention was $9.93 billion for the 2024-2025 contract year, and an insurer's retention is its FHCF premium multiplied by a retention multiple calculated under the FHCF premium formula.

Exposure Reporting and Examination Programs

Ratemaking

Claims-Paying Capacity

  • The FHCF does not constitute a full-faith-and-credit obligation of the State of Florida; its potential obligation for a contract year is limited to its cash balance, risk transfer recoveries and the amounts it is able to borrow.
  • The FHCF calculates its claims-paying capacity in May and October of each year, including projected cash balance and bonding capacity for the ensuing 12-month and 24-month periods; the October 2024 estimates were 7.9 billion for the first 12 months after an event and 14.7 billion over 24 months.

Debt Financing and Risk Transfer

  • After a hurricane the FHCF issues post-event bonds when its projected reimbursement payments exceed its cash resources, repaid primarily from emergency assessments on most property and casualty insurance premiums, with a maximum assessment of six percent for losses from any one year and ten percent for losses from multiple years.
  • The assessment base was $92.8 billion at the end of 2024.
  • The FHCF also issues pre-event debt to provide liquidity for prompt payment of covered losses.

Hurricane Losses

Laws and Rules

Advisory Council

Historical Information

History of Legislative Changes

General Statistical Summary Through December 31, 2024

Claims-Paying Resources

Participating Insurer's Coverage

Historical Losses

Historical Losses Over Time

FHCF Funding for Hurricane Loss Mitigation

Related readings

  • Private Flood Insurance and the National Flood Insurance Program (Horn & Webel - 2023) — assigned with it for objectives B1–B3
  • Personal Insurance (Cook - 2013) — assigned with it for objectives B1–B3

Sources