In keeping with the administrators of the Florida Hurricane Catastrophe Fund (FHCF), losses to the fund that gives a reinsurance-like reimbursement for a portion of residential property insurers’ hurricane losses from recent hurricanes Helene and Milton are expected to fall between $1.6 billion and as much as $6.2 billion.

Paragon Strategic Solutions, the FHCF’s consulting actuary, puts a degree estimate of $4.6 billion for the FHCF’s combined losses from the 2 hurricanes.

But the bulk are expected to come back from hurricane Milton, with that storm alone having a degree estimate of losses at $4.5 billion.

The FHCF’s share of losses for Hurricane Helene are expected to range from $18 million to $441 million, with an initial point estimate of $100 million.

While, the FHCF’s share of losses for hurricane Milton are expected to range from $1.6 billion to $5.8 billion with an initial point estimate of $4.5 billion.

For comparison, hurricane Ian from 2022 is estimated as a $9.5 billion loss to the FHCF.

These estimates are based on model outputs, so subject to vary, but show that the FHCF is predicted to take a comparatively significant proportion of the hurricane Milton loss, having change into the reinsurance source of last resort for a lot of homeowner carriers lower layers.

Losses from these hurricanes will deplete the FHCF funding somewhat, nevertheless it has ample borrowing capability.

But, with potentially as much as $6.63 billion in additional funds or potential borrowing needed after this hurricane season, based on the financial projections, it raises the prospect of assessments, or costs that ultimately are borne by taxpayer or policyholder.

The FHCF continues to have the power to buy its own reinsurance protection, or to utilise other risk transfer instruments similar to catastrophe bonds, to push a few of its risk into the private markets and reduce the potential assessment or taxpayer burden.

The FHCF purchased reinsurance for a couple of years through 2019, at one stage as much as $1 billion in cover, but then elected to not in 2020 citing the fee and market conditions on the time.

The FHCF juggles cost versus burden on Florida’s residents in terms of financing, hence more traditional borrowing has been preferred through recent years.

But there are continual questions raised about what happens when the FHCF exhausts, or nearly exhausts, its funding after a serious storm or series of storms and whether public markets might then lose their appetite to support its borrowing needs.

It’s been said for well over a decade that the FHCF can be a main opportunity for the financial community to innovate on securitization, leveraging debt-like structures with catastrophe triggers, perhaps, and structuring them in such a way as to get a rating to draw and produce in greater volumes of institutional capital to support the FHCF’s funding needs.

FHCF aside, Florida itself needs a layered, efficient and responsive catastrophe capital stack, as the necessity for financing for response and recovery from hurricanes is obvious across its public, municipal and state services.

You’d think Florida can be the proper petri dish for testing recent financial concepts, with the goal of shifting more of the burden of catastrophe losses away from residents and into private and non-private markets. It’s a shame we haven’t seen a more concerted effort to reimagine the financial protection derived from institutions just like the FHCF, to use their advantages more broadly and enhance their stability and sustainability.