Florida board approves premium reimbursement formula to help insurers

by | Apr 8, 2024

The Florida Hurricane Catastrophe Fund Advisory Council has endorsed a new premium reimbursement formula expected to lighten the financial load on insurers in Florida by reducing reimbursement rates.

The Florida Hurricane Catastrophe Fund Advisory Council has approved a new premium reimbursement formula that will help alleviate the burden on insurance companies operating in Florida.

The FHCF operates under the State Board of Administration and is a tax-exempt state trust fund that reimburses a portion of hurricane losses to residential property insurance companies in the Sunshine State.

According to FHCF’s website, it operates to protect and advance Florida’s interest in maintaining sufficient insurance capacity. All residential property insurance companies are mandated to participate in the FHCF and enter into a reimbursement contract.

Under Florida statutes, contracts must stipulate that coverage for each contract year does not exceed the funds-paying capacity of the FHCF, which is limited to $17 billion.

In late March, the FHCF approved a new reimbursement formula that would be reduced by 6.86% for insurance companies that do not change their coverage selections for contract year 2024-25. The FHCF overall rate change is projected to decrease by 7.38 percent, after adjusting for individual company coverage selection changes from the previous year.

According to the FHCF 2024 Ratemaking Formula Report, based on 2023 market shares and 2024 coverage selections, the average coverage is projected to be 86.874% in 2024, a 0.56% decrease from 2023 which was 87.36 percent.

The report states that the decrease in average coverage selection for FHCF, generates the 2024 FHCF layer of $19.5 billion, a slight increase over 2023’s $19.4 billion layer. It further states that rate changes vary by deductible, construction type and territory.

In the report’s summary of changes to the 2024 rate-making formula, it states that several notable factors impact the rate and premium changes including projected growth in the fund’s exposure; modeled loss cost decreases; law and ordinance assumption changes; pre-event note expenses and mobile home manufacture dates.

Projected loss retention for 2024 is $9.9 billion, increasing from $9.4 billion in 2023, while the FHCF premium will increase from $1.513 billion to $1.532 billion. This is due to exposure growth, coverage selection changes, and rate decreases.

In January, Bloomberg reported that the Florida State Board of Administration made a securities filing that indicated it intended to generate at least $1.5 billion from the sale of municipal bonds to replenish the FHCF and provide a further safety net for insurers.


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