Florida hurricane catastrophe fund says losses from Ian likely as high as $10 billion

The Florida Hurricane Catastrophe Fund, which is a state-run program that provides critical back up coverage to insurance companies, is likely to incur $10 billion in losses from Hurricane Ian, state officials confirmed on Wednesday.

The program is commonly known as the “Cat Fund” and will be assisting in dealing with the financial consequences of Ian; however, it is likely to go into the 2023 hurricane season with its cash reserves depleted.

“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 operating officer, said during a meeting of the Florida Hurricane Catastrophe Fund Advisory Council.

The Cat Fund aims to offer stability to the property-insurance market in extreme situations. Carriers also buy private reinsurance, which can offer reinsurance to assist in settling claims when the state is hit by extreme weather.

Under Florida state law, the liability for the Cat Fund this year is capped at $17 billion. The fund went into the hurricane season with $15.8 billion in cash and proceeds, which are dubbed “pre-event” bonds.

Estimates of overall industry losses from Hurricane Ian have differed but are in the range of tens of billions of dollars. The firm Raymond James, which serves as a financial adviser to the Cat Fund, released a report Wednesday that said 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 said. “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.”

Wilson added that the fund has been given initial information that at least 82 companies are likely to be eligible for Cat Fund reimbursements, with 28 maxing out their reimbursement. In comparison, she said, nine carriers received maximum amounts after Hurricane Irma in 2017.