5.2 Florida Hurricane Catastrophe Fund (FHCF)

What the FHCF Is

The Florida Hurricane Catastrophe Fund (FHCF) is a state-run, tax-exempt reinsurance fund created after Hurricane Andrew (1992) and administered by the State Board of Administration (SBA). Reinsurance is insurance for insurers: when a primary insurer pays a flood of hurricane claims, the FHCF reimburses a portion of those losses. Because it is a government program, the FHCF provides this reinsurance more cheaply than the private global reinsurance market, and that savings is meant to pass through to policyholders as lower rates.

Participation is mandatory. Every authorized (admitted) insurer that writes covered residential property lines in Florida must sign a reimbursement contract with the FHCF and pay an annual premium. An insurer cannot opt out and still write covered Florida property. This universal participation is what gives the fund its market-stabilizing role: it spreads catastrophic hurricane risk across the entire residential property market and keeps private reinsurance demand (and cost) lower than it would otherwise be.

How FHCF Coverage Works: Retention and Coverage Levels

FHCF coverage is structured like a large deductible layer. Each insurer has a retention — the FHCF's equivalent of a deductible — which the insurer must absorb before FHCF reimbursement begins. The retention is calculated industry-wide and then allocated to each company based on its share of FHCF premium. Above the retention, the FHCF reimburses a percentage of the insurer's covered hurricane losses up to that insurer's selected maximum (the coverage level).

When it signs its annual reimbursement contract, an insurer selects one of three coverage levels:

A higher coverage percentage means a higher FHCF premium. The fund has a statutory maximum payout (its overall capacity), funded by accumulated premiums, investment income, and — if a season exhausts cash — the SBA's authority to issue revenue bonds repaid through emergency assessments on most Florida property and casualty policyholders. By absorbing the middle layer of catastrophic losses cheaply, the FHCF lets primary insurers buy less private reinsurance and helps prevent insolvencies after a major storm.

Hurricane Deductibles

Separate from the FHCF (which is insurer-to-insurer reinsurance), Florida law sets special hurricane deductible rules that apply to the policyholder. Under the Florida Insurance Code, personal residential insurers must offer hurricane deductible options of $500, 2%, 5%, or 10% of the policy's dwelling (Coverage A) limit. The percentage deductibles can be far larger than a flat dollar deductible, so consumers must understand them.

The defining Florida rule is the per-calendar-year (annual) hurricane deductible: the hurricane deductible applies once per calendar year, not once per storm. If a homeowner suffers hurricane losses from a first storm and meets the deductible, then a second hurricane strikes in the same calendar year, the insurer may apply only the greater of the remaining hurricane deductible amount or the policy's standard all-other-perils deductible to the later loss — the policyholder does not pay a full second percentage hurricane deductible. This protects Floridians during active seasons with multiple landfalls.

The 2022-2023 Reforms

Facing an availability crisis and rampant litigation, the Legislature passed major reforms in special sessions, principally SB 2D (May 2022) and SB 2A (December 2022):

• Assignment of Benefits (AOB): AOBs were effectively prohibited for property insurance policies issued on or after January 1, 2023, ending the practice of contractors taking over claims and suing in the policyholder's place.
• One-way attorney fees: The longstanding one-way attorney-fee statute (which guaranteed a prevailing insured's lawyer fees against the insurer) was eliminated for property insurance disputes, removing a key litigation incentive.
• Mandatory mediation / dispute resolution: Reforms strengthened pre-suit notice and alternative dispute-resolution requirements before property suits.
• Prompt-pay and claim-handling timelines: Insurers must acknowledge a claim communication within 7 calendar days, begin investigation promptly, and the time to conduct a physical inspection on a hurricane claim was shortened from 45 days to 30 days; insurers must also pay or deny within statutory deadlines.

Why These Reforms Matter for the Market

The purpose of the FHCF and the 2022-2023 reforms is the same: stabilize the Florida property market so private insurers will stay and write business. The FHCF tackles the cost side via cheap catastrophe reinsurance; the reforms tackle the litigation side that insurers blamed for outsized loss-adjustment expense. Before reform, Florida accounted for a disproportionate share of the nation's property-insurance litigation, much of it driven by AOB arrangements and the one-way attorney-fee rule.

By removing those incentives and compressing claim-handling timelines, the Legislature sought to reduce frivolous suits and entice carriers back into the voluntary market — which in turn shrinks Citizens.

For the policyholder, the claim-filing deadline is now critical. Under current Florida law, a new or reopened property claim must generally be filed within a 1-year window (and a supplemental claim within 18 months) of the date of loss — a sharp reduction from older multi-year periods. Producers must counsel clients to report storm damage promptly.

The FHCF and Citizens together form Florida's public backstop, while the reforms reshape how private insurers handle and litigate the claims that flow through that system.