Florida’s Cat Fund facing financial woes
This year’s Atlantic hurricane season is scheduled to begin on June 1. The season has yet to begin but has been the subject of speculation throughout the insurance industry. The past two years have played host to turbulent seasons, one of which caused significant damage in the eastern U.S. Some predictions hold that this year’s season may be mild, but Florida may not be able to withstand a hit from a strong storm. The Florida Hurricane Catastrophe Fund (Cat Fund), a state-run service that supplies reinsurance for insurance companies operating within the state, may be unable to handle another disastrous year.
Advisory panel notes that the state may be $2 billion short on covering hurricane claims
Last week, an advisory panel set up by the state Legislature concluded an investigation into the state of the Cat Fund. The panel found that the state may fall approximately $2 billion short of what would be needed if the state were struck by a even a moderately powerful hurricane. The panel claims that borrowing money from other states or the federal government is the only way to close the financial gap, a notion that has not been popular with legislators due to the state’s troubled finances.
Cat Fund may be liable for billion in insured losses if Florida is struck by powerful storms
Depending on the severity of this year’s hurricane season, the Cat Fund may be liable for nearly $17 billion in insured losses. The advisory panel notes that the state’s program will hold nearly $8 billion in reserves by the end of the year. Cat Fund financial advisers note that the estimates provided by the advisory panel are conservative and do not fully reflect the volatility that is inherent in the bond market due to the 2008 economic crisis.
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Lawmakers urged to take action to bolster Cat Fund
Last year, legislators attempted to shrink the Cat Fund, but their efforts were sidelined by concerns that this act would lead to a spike in insurance premiums. The advisory group is now petitioning the Scott administration to make changes to the Cat Fund that would bolster the state’s ability to withstand the financial impact of a powerful hurricane.
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