Best estimate for FHCF pay out for Milton & Helene pegged at $4.6bn

The Florida Hurricane Catastrophe Fund (FHCF), a tax-exempt trust fund created by the State in 1993 to provide coverage for property insurers, could pay out an estimated $4.6 billion due to claims from Hurricanes Milton and Helene, according to its independent actuary, Paragon Strategic Solutions Inc.

The FHCF was created to operate exclusively to protect and advance Florida’s interest in maintaining insurance capacity by providing contractually specified coverage that reimburses a portion of residential property insurers’ hurricane losses. Participation is mandatory for authorized property insurers, subject to limited exceptions.

The FHCF’s maximum potential liability is $17 billion. In addition to cash and pre-event bonds, it could seek financing through what are known as “post-event bonds.”

It is projected to have $7.12 billion in cash to pay losses this year and has access to $3.25 billion in what is known as “pre-event” bond money if needed.

The $7.12 billion 2024 year‐end projected fund balance is based on assumptions prepared by Paragon, the FHCF’s independent actuary, and Raymond James, the FHCF’s financial advisor, and reflects the loss reserves for Hurricanes Ian and Idalia, but does not reflect loss estimates for Hurricanes Helene and Milton.

The preliminary estimate of around $4.6 billion includes $4.5 billion from Milton, which made landfall Oct. 9 as a Category 3 storm in Sarasota County before continuing across the state as a Hurricane, and $100 million for Helene, which struck west-southwest of Perry in Taylor County, Florida, on September 27 as a Category 4 Hurricane, with maximum sustained winds of 140 mph.

“Paragon currently projects that the FHCF will not have any losses from Hurricane Debby and that the FHCF’s share of losses for Hurricane Helene will range from $18 million to $441 million, with an initial point estimate of $100 million, and for Hurricane Milton the FHCF’s share of losses will range from $1.6 billion to $5.8 billion with an initial point estimate of $4.5 billion,” FHCF disclosed in a recent report.

However, the FHCF noted significant uncertainty regarding the ultimate loss amount as losses are just beginning to develop.

“Estimates are based on the output models; therefore, there is no guarantee that actual losses will fall within the projected range. Due to the preliminary nature of these estimates, reserves have not yet been established,” it concluded.

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