The Florida Hurricane Catastrophe Fund (FHCF) is a state-backed trust fund that reimburses residential property insurance companies — not homeowners — for a share of their losses after a hurricane. By offering this coverage at below-market rates, the fund helps keep Florida's home insurance market stable and makes it easier for homeowners to get and keep Florida home insurance.
The Florida Hurricane Catastrophe Fund explained
The FHCF is a tax-exempt trust fund managed by Florida’s State Board of Administration. It provides reinsurance — essentially insurance for insurance companies — to residential property insurers for hurricane-related losses in Florida.
Here’s how it works: When hurricanes cause property damage, the FHCF reimburses insurers for a portion of the money they pay out to policyholders who filed claims.
In 1992, Hurricane Andrew made landfall in Florida and caused $15 billion of property damage in the state. The losses drove about a dozen insurers into insolvency. Others considered scaling back coverage or withdrawing from Florida. As a response, Florida established the FHCF in 1993 to stabilize the industry and encourage insurers to continue issuing policies in the state.
All residential property insurance companies in Florida are legally required to participate in the FHCF and purchase coverage from the program. To encourage insurers to remain in the market, FHCF rates are priced below what private reinsurance companies typically charge.
The FHCF gets most of its money from the payments insurers make for their coverage. It also earns investment income, and if it ever runs short, it can borrow money, then pay that debt back by adding a surcharge to insurance bills statewide.
Does the FHCF pay homeowners directly?
The FHCF does not pay homeowners directly for hurricane losses. Instead, it reimburses home insurance companies for a percentage of money paid out to policyholders once claims payouts reach a specific dollar threshold. Homeowners who experience a hurricane-related loss must file claims directly with their home insurance provider.
How the FHCF reimburses insurance companies
Each year, participating insurers select a coverage percentage of 45%, 75%, or 90%, which determines how much of their qualifying losses will be reimbursed. Insurers pay premiums directly to the FHCF in exchange for coverage. Premiums are calculated annually, but insurers can pay with three installments throughout the year. The insurer’s policy cost and coverage level are based on its total insurance coverage by ZIP code, which the insurer must report to the FHCF annually.
FHCF coverage applies whenever a hurricane creates insured losses in Florida, even as the hurricane weakens and the storm status is downgraded. The insurer pays approved claims on its own, up to a certain point — called its retention. Think of retention as the insurer's own deductible, meaning the amount it has to cover before FHCF kicks in.
After that, the FHCF steps in. It reimburses the insurer for a share of the remaining losses, matching whichever coverage percentage the insurer picked — 45%, 75%, or 90% — plus an extra 10% to help cover the cost of processing those claims. The maximum reimbursement for an individual insurer reflects the insurer’s share of the FHCF’s ability to pay out claims, not to exceed the maximum obligation (currently set at $17 billion).
Put together, an insurer's path to FHCF reimbursement looks like this:
-
Step 1: The insurer selects its coverage percentage and pays premiums to the FHCF.
-
Step 2: A hurricane causes insured losses that exceed the insurer’s retention.
-
Step 3: The insurer files a claim with the FHCF online by submitting a loss report. Once the information is verified, the FHCF can process the claim for payment.
How the FHCF affects what Florida homeowners pay
When reinsurance is expensive, insurance companies usually pass that cost on to homeowners through higher rates. Because the FHCF sells coverage to insurers below market price, it saves them money — savings that can turn into lower costs for homeowners.
But there's a flip side. If the FHCF ever runs short on money to cover what it owes, it can borrow the difference and pay that debt back over time. It does this by adding a surcharge to property and casualty insurance bills across the state, meaning homeowners could end up footing part of that bill, too.
How the FHCF differs from the Florida insurer of last resort
The FHCF and Florida’s insurer of last resort (Citizens Property Insurance Corporation) were both created to stabilize the property insurance market and help homeowners secure coverage. But they are separate programs.
-
Citizens is a state-run property insurer that offers home insurance to residents who are unable to get a policy through the private market. It covers homeowners and their property.
-
The FHCF is a reinsurance fund for insurance companies to get reimbursed for a portion of their losses when a hurricane causes them to pay out claims exceeding a certain amount. It covers insurance companies, not homeowners.
Frequently asked questions
What is the Florida Hurricane Catastrophe Fund?
The FHCF is a tax-exempt trust fund created by Florida in 1993 and managed by the State Board of Administration. It serves Florida's property insurance industry by reimbursing insurers for some of their losses after a hurricane causes property damage.
How does the FHCF work?
The FHCF receives most of its funding from premiums paid by insurers in exchange for coverage. When a hurricane causes property damage and an insurer has to pay out claims that exceed its retention (a deductible for insurance companies), the FHCF will reimburse the insurer for a percentage of those losses. The FHCF can also raise funds from investment income and by issuing bonds backed by an emergency assessment on property and casualty policies statewide.
Who is the insurer of last resort in Florida?
Florida’s insurer of last resort is Citizens Property Insurance Corporation, a state-managed insurer that provides property insurance for homeowners who can’t obtain it on the private market.
How much of the $10 million appropriated for the Florida Hurricane Catastrophe Fund is allocated for retrofitting existing public hurricane shelters?
Florida sets aside $10 million from its FHCF appropriation for hurricane resistance programs. Of that money, $3 million is intended for retrofitting facilities used as public hurricane shelters, and $7 million is used for programs to improve the wind resistance of residences and mobile homes. This money is not taken out of the FHCF reinsurance fund itself; instead, it’s a separate legislative line item of funding.
