What is Fhcf assessment?
FHCF Emergency Assessments The Florida Hurricane Catastrophe Fund (FHCF) is a state program that reimburses residential property insurers in Florida for a portion of their losses from hurricanes.
How does the Florida hurricane Cat Fund work?
The FHCF collects over $1 billion in annual reinsurance premium from the insurers that write personal residential coverage in the state of Florida and, in the event of a major loss, can levy an assessment on all property and casualty insurance policies written in Florida except those that provide coverage for workers …
What does Fhcf cover?
The Florida Hurricane Catastrophe Fund (FHCF) is a tax exempt state trust fund that provides reimbursement to residential property insurers for a portion of their Florida catastrophic hurricane losses.
What is a cat fund?
A catastrophe bond (CAT) is a high-yield debt instrument that is designed to raise money for companies in the insurance industry in the event of a natural disaster. A CAT bond allows the issuer to receive funding from the bond only if specific conditions, such as an earthquake or tornado, occur.
Can you buy cat bonds?
Individual investors don’t commonly buy cat bonds. Most catastrophe bond investors are hedge funds, pension funds, and other institutional investors. Some mutual fund companies invest in cat bonds by tracking an underlying index like the Swiss Re Cat Bond Performance Index.
Why is designing a trigger necessary for cat bonds?
Trigger mechanisms vary from bond to bond. Various trigger types are intended to balance the preferences of the sponsor and the investor. For example, the payout from an indemnity bond is based on actual losses to the sponsor. Sponsors appreciate this type of trigger because it eliminates basis risk.
Can retail investors buy cat bonds?
Individual investors don’t commonly buy cat bonds. Most catastrophe bond investors are hedge funds, pension funds, and other institutional investors.
Who can buy cat bonds?
In general, cat bonds are purchased by institutions, such as hedge funds, mutual funds and pension funds, and not individuals. Indeed, a retail investor might be poorly served by investing in just one or even a clutch of cat bonds.
How do cat bonds pay out?
A CAT bond allows the issuer to receive funding from the bond only if specific conditions, such as an earthquake or tornado, occur. If an event protected by the bond activates a payout to the insurance company, the obligation to pay interest and repay the principal is either deferred or completely forgiven.
How is bond triggered?
Industry Loss Index. The bond is triggered based on actual losses to the insurance industry as a whole.
How are cat bonds priced?
Pricing of individual cat bonds is based largely on the expected loss—the average amount of principal an investor can expect to lose in the year ahead.
WHO issues a CAT bond?
In general, CAT bonds are issued by three different types of institutions: insurance companies, reinsurers, and state catastrophe funds. These three types of institutions employ CAT bonds in their own distinctive ways to offload their specific insurance risks.