One-in-100-year Probable Maximum Loss Event

According to the Florida Hurricane Catastrophe Fund, insured residential losses would be $48 billion to $50 billion, with another $20 billion in auto and business/commercial losses, for a $70 billion total.

Cat Fund reimbursements would reach $27.8 billion, just under the current maximum amount. The program would have to sell $25.7 billion in bonds, if that were possible and, according to the Cat Fund Advisory Council and others, it is not doable in today's troubled U.S. economy. If $26 billion in bonds could be sold, they would be retired through a 4.96 percent assessment for 30 years on auto homeowners, all business owners and all motor vehicle policies.

Citizens Property & Insurance Corporation losses would be about $24 billion and Citizens share of the Cat Fund would be about $12 billion.

One-in-50-year Probable Maximum Loss Event

According to the Cat Fund, insured residential losses  insured residential losses would be $30  billion, with another $12 billion in auto and business/commercial losses, for a $42 billion total.

Cat Fund losses would be $22.5 billion and it would bond for $20.52 billion if this amount were available. The bonds would be retired through a 3.87 percent  assessment for 30 years.

Many different storm scenarios could produce 1-in-100-year PML’s. Certainly a category 4 or category 5 hurricane striking Miami could generate this horrible level of losses. It is possible a
category 3 hurricane striking Tampa could produce 100-year losses as well.

2004/2005 Hurricane Seasons

The 2004 hurricane season, producing $16 billion in residential insured losses, is estimated at a 1-in-30-year event, according to the Cat Fund. The 2005 hurricane season, producing $10.8 billion in residential losses, is estimated at a 1-in-12 or 1-in-13-year event.

The Cat Fund’s actual reimbursements from 2004/2005 are calculated at $7.45 billion. The Cat Fund had accumulated about $6.2 billion, which it used for reimbursements, and it bonded for $1.35 billion. It is levying a 1 percent assessment for six years to retire those bonds.

The same hurricanes, if occurring in 2008 and 2009, would cost the Cat Fund $15.144 billion and it would have to bond for  $11.74 billion. The increase is largely the result of expanded Cat Fund capacity from HB 1A. It would levy a 2.23 percent assessment over 30 years.

Cat Fund officials acknowledge there is much uncertainty over how many billions of dollars in bonds could be sold in a timely manner. $12 billion certain seems more attainable than over than $20 billion, but even that is not certain.

Assessment Costs to Average Florida Family

The average family pays $6,000 a year in premium for the insurance lines that would be accessed by the Cat Fund – homeowners, business commercial insurance costs passed along to them and automobile and motor vehicle. The assessment for $26 billion in bonds during a 100-year event would be $133.80 a year and amount to $4,000 over 30 years.

The $1.35 billion in bonding from 2004/2005 cost the average family a 1 percent assessment for six years and a total of $360.