Florida cat fund saw 9% y/y rise in PML’s; net fund position rebounds
The Florida Hurricane Catastrophe Fund (FHCF) saw a neighbourhood 9% year on year increase in gross probable maximum losses (PML) for its underlying reinsurance exposure, the fund has said.
A 1-in-250 year event would likely trigger $95.4 billion in losses above to residential policyholders, excluding loss adjustment expenses, an annual PML report from the fund indicates.
The PML for a 1-in-100 year event rose 9.4% to $63.3 billion while the PML for a 1-in-50 year event rose 8.4% year on year to $41.67 billion, the report indicated.
The fund is shielded by a $17 billion statutory limit on payouts plus a unified retention for the industry, projected to rise to $9.9 billion for the 2024-25 season from $9.5 billion in the current contract year which runs through end-May.
As a result, even the 1-in-50 year event is within 11% of the statutory maximum, reduced only by the likelihood that not all individual carrier-members would hit their own individual limits. The 1-in-100 event would bring an FHCF liability within 3.2% of max and the 1-in-250 within a tiny fraction.
Despite would-be payments near maximum levels, eventual member assessments following a major event are projected at lower levels than a year prior given a forecast rebound in the fund's net position.
Eventual assessment rates on members for post-event financial rebuilding would fall by some 40% or 60-70 basis points (bps) versus the prior year scenario depending on the scenario, a comparison of fund reports indicated. Assessments following a 1-in-250 year event would fall 72 bps versus the prior year estimate to 1.09%.
The FHCF now estimates the end-2023 net fund balance rose to $4.29 billion, after having fallen 75% year on year to $2.75 billion for the mid-year tally following the major hit from Hurricane Ian and continuing bookings for Hurricanes Michael and Irma.
The FHCF now estimates approximately $1.8 billion in reimbursement premium and interest earnings, net of expenses and debt service, for the 2024-2025 contract year, to bring the fund balance to approximately $6.06 billion by end-2024.
In addition, the FHCF has $2.25 billion out of $3.5 billion in pre-event bond funding available as an early cushion against 2024-2025 contract year events. Some $1.25 billion of the $3.5 billion total outstanding matures mid-year 2025 and doesn't qualify for the count.
The Fund could top up the pre-event financing sum shortly. The Florida State Board of Administration Financial Corporation, which runs to markets on behalf of the state's cat fund, gave warning to investors that it “is considering the issuance of $1.5 billion or more.
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