Tuesday, May 22, 2018
Business

State Catastrophe Fund ready to pay up to $17B in claims as Irma looms

TALLAHASSEE — If Hurricane Irma wreaks havoc on the state, the Florida Hurricane Catastrophe Fund is poised to immediately help private insurance companies cut checks for their customers' claims up to $17 billion.

"We're fully liquid," John Kuczwanski, spokesperson for the fund, said. "The Cat Fund's ability to pay the participants is not a question. It will happen."

Nicknamed the "Cat Fund," the state fund offers reinsurance for insurance companies — which those insurers are required to buy. The reinsurance kicks in once the private insurance companies reach a certain amount of losses. Because they buy in at different rates, the specific minimum losses vary per company.

Though it's too early to predict what damage Hurricane Irma will cause, some experts are concerned that the storm will be as bad as or worse than Hurricane Katrina was in 2005, which caused $49.8 billion in damages.

The fund currently has $18.6 billion, more than the $17 billion statutory cap it is allowed to pay out. About $14.9 billion of that is cash on hand, and another is $1 billion in reinsurance that kicks in if losses top $11.5 billion. The Cat Fund also has $2.7 billion in pre-event bonds.

That leaves an extra $1.6 billion for the 2018 hurricane season.

LIVE BLOG: Latest updates on Hurricane Irma.

COMPLETE COVERAGE:Find all our coverage about Hurricane Irma here

Insurance companies typically start submitting for reimbursement about a week or two following a hurricane.

"It's really a component of this that no one should worry about," Kuczwanski said.

Likewise, state-run Citizens Property Insurance Corp. — which covers those who cannot find property coverage on the open market — has $13.2 billion in claims paying ability, spokesperson Michael Peltier said. About $2.3 billion of that comes from the catastrophe fund.

It's too early to estimate potential damages, Peltier said. The state insurer estimates that the worst-case scenario — a once-in-a-century storm — would result in $6 billion in claims. Citizens won't know whether Hurricane Irma fits that until afterward.

"We'll see what happens when it hits," Peltier said.

Contact Malena Carollo at [email protected] or (727) 892-2249. Follow @malenacarollo on Twitter.

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