Florida Cat Fund May See Increased Bond Issuance Amid Active 2024 Hurricane Season

The 2024 Atlantic Hurricane Season is projected to be particularly active, prompting concerns for Florida’s insurance landscape. The Florida Hurricane Catastrophe Fund (FHCF) may face significant strain, potentially requiring more bond issuance to cover projected losses. FHCF’s current reserves of $6.9 billion fall short of the estimated $9.5 billion in potential damages from a storm akin to Hurricane Ian in 2022. To manage this, FHCF holds $3.25 billion in pre-event debt proceeds and possesses the authority to issue additional bonds, ensuring it can meet its $17 billion liability cap for a single season.

Florida’s economy relies heavily on FHCF to maintain real estate and mortgage market stability. Nearly 40% of premiums in Florida are ceded to reinsurers, higher than the national average. This high dependency emphasizes the necessity for FHCF to remain well-capitalized. Despite these challenges, Florida benefits from low liabilities relative to its resources, supported by ample revenue capacity.

In contrast, Citizens Property Insurance Corporation, Florida’s insurer of last resort, is better positioned. With claims-paying resources sufficient for a 1-in-80 year storm, Citizens is less likely to require additional debt. Recent legislation merging its three account lines has strengthened its financial position. However, premiums remain below market rates, constrained by statutory limits, posing a long-term risk if catastrophic events become more frequent.