Florida Hurricane Catastrophe Fund

Home , Hurricane Hermine, Hurricane Irma, Hurricane Michael

FLORIDA HURRICANE CATASTROPHE FUND

19TH ANNUAL PARTICIPATING INSURERS WORKSHOP JUNE 5-6, 2019 ORLANDO, FLORIDA Opening Comments & Introductions

Anne Bert, Chief Operating Officer, Florida Hurricane Catastrophe Fund

Hurricane Michael

Florida Hurricane Catastrophe Fund 2 Schedule June 5, 2019

8:15 Ask Our Experts 9:00 Welcome 9:10 Keynote Speaker – The Honorable Dennis Ross, Member of the U.S. House of Representatives from Florida’s 15th District 2011-2018 and Member of the Florida House of Representatives from the 63rd District 2000-2008, Of Counsel, GrayRobinson 9:45 FHCF Status Update 10:10 BREAK 10:30 2018 Hurricane Season Recap and 2019 Hurricane Season Forecast 11:15 Hurricane Michael’s Total Devastation 12:00 LUNCH

Florida Hurricane Catastrophe Fund 3 Schedule June 5, 2019

1:30 Floodplain Management Factors that Affect Flood Insurance 2:10 Drones and Smart Phones in Disaster Zones 2:40 BREAK 3:00 Insights Gained from Hurricanes Irma and Michael 3:50 Hot Topics: Research Topics and 2019 Major Changes 4:15 Closing Remarks

Florida Hurricane Catastrophe Fund 4 Keynote Speaker The Honorable Dennis Ross Member of the U.S. House of Representatives from Florida’s 15th District 2011-2018 and Member of the Florida House of Representatives from the 63rd District 2000-2008, Of Counsel, GrayRobinson

Florida Hurricane Catastrophe Fund 5 FHCF Status Update Anne Bert, Chief Operating Officer, Florida Hurricane Catastrophe Fund

Hurricane Michael

Florida Hurricane Catastrophe Fund 6 Overview

2017-2018 Hurricane Season Update FHCF’s Financial Strength Structure of the FHCF Looking Ahead

Florida Hurricane Catastrophe Fund 7 8 Hurricane Hermine . Landfall on September 2, 2016 . No Hurricane Hermine loss reimbursement requests received to date and none expected

Florida Hurricane Catastrophe Fund 9 Hurricane Matthew . Eye bypassed Florida on October 7, 2016 . The FHCF covers losses from hurricanes that cause damage in Florida regardless of whether or not they make landfall . No Hurricane Matthew loss reimbursement requests received to date

Florida Hurricane Catastrophe Fund 10 Hurricane Irma

. First landfall on September 10, 2017, at Cudjoe Key as a Category 4 storm . Second landfall at Marco Island as a Category 3 storm

Florida Hurricane Catastrophe Fund 11 FHCF Cash Balance available to pay claims $12.4 Billion

Florida Hurricane Catastrophe Fund 12 Hurricane Michael

. Landfall on October 10, 2018, at Mexico Beach as a Category 5 storm

Florida Hurricane Catastrophe Fund 13 FHCF Cash Balance available to pay claims $12.4 Billion

Florida Hurricane Catastrophe Fund 14 Reported Industry % of Reported Contract Year FHCF Paid Paid in FL Paid in FL

1995 13,000,000 2,000,000,000 0.7% 2004 3,859,300,050 15,859,709,655 24.3% 2005 5,535,996,111 11,645,733,031 47.5% 2017 2,140,886,184 8,738,750,134 24.5% 2018 421,002,385 2,854,525,017 14.7% Total 11,549,182,345 38,244,192,820 30.2%

* Does not reflect the total value of FL residential losses, as insurers do not report losses to the FHCF after they have reached their coverage limit.

Florida Hurricane Catastrophe Fund 15 FHCF’s Financial Strength . $12.4B Projected Year-End Fund Balance . No post-event bonds outstanding . Emergency assessments ended – 0% on all policies new or renewed on or after January 1, 2015 . May Bonding Capacity - $8.6B (0-12 months) . Long-term stability and resilience for subsequent season is addressed with: . $1.65B Outstanding pre-event bonds . $1.00B Projected reinsurance placement

Florida Hurricane Catastrophe Fund 16 Not Official (For Illustrative Not Drawn to Scale. 2019/2020 Contract Year Purposes Only) Preliminary Estimates

as of May 8, 2019 Ground Up Return Probability $17B FHCF Capacity Losses Time (%) (Loss Adjustment Expense 10% allowance is included in the capacity) ($B) (Years) Assumption: Ultimate Losses of $1.45B for Hurricane Michael in 2018 $26.4 39.1 2.56% $1.9B – Post-Event Bonding $3.6B Potential $24.2 35 2.86% Post-Event $1.7B – Series 2013A & 2016A Pre-Event Bonds Bonding

$22.4 31.4 3.19% $1.9B of $12.4B Projected 2019 Year-End Fund Balance $12.43B Cash 1.65B 2013A & 2016A Bonds* $20.2 27.4 3.65% $1.0B – Projected Risk Transfer 1.00B Risk Transfer (proj.) $15.08B Total Resources $19.1 25..6 3.90% Payments - -$17.00B Statutory Limit Co

$3.5B Industry $1.92B Potential Bonding $10.5B of $12.4B Projected 2019 Needed Year-End Fund Balance

* Excludes $550M debt service payment due July 1, 2019

$7.4 9.9 10.10% Post-Event Bonding Capacity $7.4B Industry Retention May 2019 $8.6B

• Individual company retentions are their share of the industry retention. Not Official (For Illustrative Not Drawn to Scale. 2020/2021 Subsequent Season Purposes Only) Preliminary Estimates $17B FHCF Capacity as of May 8, 2019 (Loss Adjustment Expense 10% allowance is included in the capacity) Assumption: No Loss in Contract Year 2019-2020

$2.5B – Post-Event Bonding $3.15B Potential Post-Event Bonding $650M – Series 2016A Pre-Event Bonds

$13.91B Cash 0.65B 2016A Bonds* $14.56B Total Resources $13.9B Projected 2020

Payments -$17.00B Statutory Limit - Year-End Fund Balance $2.44B Potential Bonding

Co Needed $3.5B Industry

* Excludes $1.0B debt service payment due July 1, 2020

Post-Event Bonding Capacity $7.75B Industry Retention May 2019 $8.6B

$15.2B – Post-Event Bonding $1.20B Cash 0.65B 2016A Bonds* $1.85B Total Resources

Payments -$17.00B Statutory Limit - $15.15B Potential Bonding

Co Needed $3.5B Industry $650M – Series 2016A Pre-Event Bonds * Excludes $1.0B debt service $1.2B Projected 2020 payment due July 1, 2020 Year-End Fund Balance

Post-Event Bonding Capacity $7.75B Industry Retention May 2019 $8.6B

• Represents industry losses. FHCF probabilities are lower at the top loss levels and higher at the lower loss levels. All insurers would need to reach their maximum coverage limit in order to exhaust the last billion of FHCF Coverage. Insurers can trigger coverage below the industry retention. • If Pre-Event bond proceeds are used and replaced with Post-Event bonds, the total potential bonding needed would be $15.80B ($15.15B + $0.65B) • Individual company retentions are their share of the industry retention. Florida Hurricane Catastrophe Fund

Current Structure & Capacity of the FHCF . Citizens is required to select 90%

Coverage Selections

Weighted 90% 75% 45% Average 2016-2017 108 3 47 75.527% 2017-2018 103 3 52 74.524% 2018-2019 104 3 59 73.121% 2019-2020 114 7 47 81.629%

Florida Hurricane Catastrophe Fund 20 Outstanding Debt

Florida Hurricane Catastrophe Fund ($ in Millions) . Laddered maturities: Series 2013A Series 2016A . Reduce market access risk Pre-Event Bonds Pre-Event Bonds Total Pre-Event Bonds . Smooth cost Maturity Principal Principal Principal . Manage rollover risk and interest 7/1/2020 $1,000 $1,000 rate risk at maturity 7/1/2021 $650 $650 Total $1,000 $650 $1,650 . Pre-event bonds provide liquidity to enable the FHCF to pay claims timely. If the proceeds are used, post-event bonds must be issued. . Total Post-event financings: $2.651B . Total Pre-event financings: $9.500B

Florida Hurricane Catastrophe Fund 21 Implementing HB 301 CS/CS/CS/HB 301 by Representative Santiago – “Omnibus” Bill . Increased the FHCF Loss Adjustment Expense allowance from 5% to 10% of reimbursed losses effective for contracts and rates on or after June 1, 2019 . FHCF will follow Florida’s rulemaking process: . 19-8.010 Reimbursement Contract . 19-8.028 Reimbursement Premium Formula and incorporated form . 19-8.029 Insurer Reporting Requirements and Responsibilities and incorporated forms

Florida Hurricane Catastrophe Fund 22

Looking Ahead

Florida Hurricane Catastrophe Fund 23 BREAK

Sponsored by: 2018 Hurricane Season Recap and 2019 Hurricane Season Forecast David Sharp, Science and Operations Officer, NOAA/National Weather Service

Hurricane Michael

Florida Hurricane Catastrophe Fund 25 Hurricane Michael’s Total Devastation

Dr. Kurt Gurley, Structural Engineer, Professor, Civil and Coastal Engineering, University of Florida

Hurricane Michael

Florida Hurricane Catastrophe Fund 26 LUNCH Floodplain Management Factors that Affect Flood Insurance

Steve Martin, National Flood Insurance Program Coordinator/Floodplain Manager, Florida Division of Emergency Management

Hurricane Michael

Florida Hurricane Catastrophe Fund 28 Drones and Smart Phones in Disaster Zones Jay Mullen, Environmental Systems Research Institute Insurance Sector Team Leader, Esri

Florida Hurricane Catastrophe Fund 29 BREAK

Sponsored by: Insights Gained From Hurricanes Irma and Michael

Moderator: Joel Meyer, Manager of Financial Operations, FHCF

Panelists: Jay Adams, Chief Claims Officer, Citizens Property Insurance Corporation

Tasha Carter, Director, Division of Consumer Services, Office of Chief Financial Officer Jimmy Patronis, Florida Department of Financial Services

Hurricane Irma

Florida Hurricane Catastrophe Fund 31 Hot Topics

Research Topics: Dr. Jack Nicholson, Director, Florida Catastrophic Storm Risk Management Center, Florida State University

2019 Major Changes: Gina Wilson, Senior Director of Operations and Examinations, FHCF

Florida Hurricane Catastrophe Fund 32 Major Changes in the 2019 FHCF Reimbursement Contract Gina Wilson, Senior Director of Operations and Examinations, FHCF

Florida Hurricane Catastrophe Fund 33 Closing Remarks Anne Bert, Chief Operating Officer, FHCF

Florida Hurricane Catastrophe Fund 34