Florida’s nine-year streak of avoiding hurricanes is helping the state reach a historic milestone: for the first time ever, the state-created fund designed to help pay out claims after storms has enough cash and assets on hand to pay off everything it could owe.
New estimates show the Florida Hurricane Catastrophe Fund should have $17 billion available for the Atlantic hurricane season that starts June 1.
“The money is there and it’s in our pocket,” said Jack Nicholson, the chief operating officer of the fund.
The financial health of the account known as the “Cat Fund” is important to Floridians regardless of where they live. Because of it, the state can impose a surcharge on most insurance policies – including auto insurance policies – to replenish it if it runs out of money. Some critics have called the surcharge a “hurricane tax.”
The main reason that the amount of money in the fund has grown is because Florida hasn’t been hit by a hurricane since Wilma lumbered across the state in 2005.
Florida created the fund after Hurricane Andrew ravaged a densely populated area of South Florida in 1992. It offers insurance companies backup coverage at prices usually lower than those in the private market. It was designed to help keep private insurers from leaving the state. Every company is required to purchase coverage to pay off claims after insurers reach a certain level of damages.
Twice a year the state relies on Wall Street firms and financial advisers to calculate how much money the fund needs – and how much it could borrow in the event of a catastrophic storm. An advisory council is scheduled to listen to a presentation on the financial health of the fund on Thursday.
A draft of that presentation shows the fund could meet its maximum claims without having to borrow any additional money, although state officials have come under fire recently for their decision to purchase $1 billion worth of backup insurance this year to meet that goal.
Gov. Rick Scott and the three elected members of the Cabinet approved the purchase last month. That came despite critics saying it could drive up homeowner rates because the state was competing against private insurance companies to buy the backup insurance, or reinsurance as it is known.
Rep. Frank Artiles, a Miami Republican, called the purchase of the reinsurance “wasteful” and said it wasn’t needed in a year where a low number of hurricanes have been forecast.
“We do not need to buy that reinsurance,” said Artiles, who works an insurance public adjuster. “You have more than enough money to survive a Hurricane Andrew (type) direct hit.”
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