Swiss Re helps Florida prepare for the next big hurricane

New risk transfer program supports the Florida Hurricane Disaster Fund in its efforts to build resilience in the US state.

There’s another drought going on—this one in Florida, which hasn’t had a major hurricane in ten years. But this good fortune doesn’t mean insurers are taking a wait-and-see attitude because they know it's a matter of time before Mother Nature once again targets the Sunshine State.

The state run Florida Hurricane Catastrophe Fund (FHCF) must rise to the challenge of helping insurers pay claims from extreme events, and for the first time in its 22-year history the FHCF has turned to reinsurance to help.

Easing burdens proactively

The FHCF has chosen Swiss Re as a leader in its first-ever reinsurance program to provide USD 200 million in protection on a USD 1 billion layer of capacity. This form of risk transfer delivers a stable hedge against insurer insolvency and ultimately eases the burden on every resident who has a policy on his or her home or business.

“Funding recovery before the disaster strikes is economically prudent and provides greater certainty allowing governments to focus on other priorities in the greatest time of need.” says Alex Kaplan, Senior Client Manager for Global Partnerships. “From the Caribbean to Mexico to the State of Alabama, governments are seeing the economic benefits of transferring a portion of their catastrophe risk to Swiss Re.”

Improving certainty in time of greatest need

The alternative can be devastating. Losses from hurricanes Katrina, Rita and Wilma in 2005 drained the FHCF’s balance so it had to impose an emergency assessment, which insurers passed on to their customers. Now, thanks to the 10-year hurricane-free period, the Fund is assessment free and can turn its attention to bolstering its capacity with reinsurance.  The FHCF continues to build its financial stability and decrease the risk that hurricanes of today do not become the financial burden to the generations of tomorrow.

"Swiss Re is very familiar with the FHCF, their leadership and the mission" says Monica Ningen, Head Property Underwriting, US & Canada. "This familiarity helped us respond quickly when the deal was put into the market."

The “hurricane drought” could break this year and Florida enters hurricane season with much on the line with more than USD 3 trillion of coastal assets. Regardless of how the wind blows Swiss Re is there to help improve the state’s economic resiliency.

Published 22 June