A breakdown of claims submitted to the fund from Aug. 1, 2008, to Aug. 1, 2009, shows that insurers turned in an additional 382 claims tied to the two storm seasons. The fund received 75 claims just this past summer alone that stemmed from 2005 losses.

Cat Fund officials now say that they may need anywhere from $300 million to $600 million in additional financing to cover the continued losses. The current shortfall is $292 million, and it is expected to continue to grow between now and the end of the year.

"We are looking to four to eight months before we have a very serious problem of running out of funds," said Cat Fund COO Jack Nicholson.

Insurance Commissioner Kevin McCarty — noting the continuing number of claims associated with Wilma — said that he is considering whether to ask lawmakers this session to impose time limits on how long claims can continue to be filed to insurers.

While there is much debate about the root cause of the increased claims, Cat Fund officials say their only recourse is to increase the amount of the existing emergency assessments already imposed on most property and auto insurance lines in the state.

The way the fund is constructed, it cannot use any of the money it is taking in now from insurers to pay off claims related to old storms. The fund is already imposing a one-percent emergency assessment on premiums to pay off past storm losses.

Nicholson said he will likely ask the trustees who oversee the fund (Gov. Charlie Crist, Attorney General Bill McCollum, and Chief Financial Officer Alex Sink) to approve additional assessment charges in early 2010 in order to avoid running out of money to pay insurers.

The shortfall is still relatively small compared to the entire $34.9 billion assessment base utilized by the Cat Fund; most insurance customers probably will not see a large spike in their bills. Nicholson said that it appears at this time that the Cat Fund will likely approve charges that would add anywhere from $6 to $7.50 a year in premiums to most Floridians.

Overall Outlook Improves

Although the Cat Fund is struggling to pay off past claims, its overall financial health continues to improve.

A state-appointed advisory council in October approved new estimates that show the Cat Fund could likely come up with $19 billion to pay off claims stemming from a major hurricane. That scenario leaves the fund with an estimated shortfall of $4.1 billion.

This is a dramatic improvement from last year, when the shortfall was estimated to be as large as $15 billion. This turnaround is based on several factors, including the improving global credit markets and a decision this past spring by state lawmakers to scale back the size of the Cat Fund's exposure. State legislators also increased the cost of coverage and authorized the fund to impose a rapid cash build-up charge.

"It all adds up to a very good trend," said John Forney of Raymond James & Associates, the lead financial advisor for the fund. "It adds to a much more robust financial performance for the Cat Fund."

Currently, the Cat Fund has liquid resources of approximately $8 billion before it would need to go into the bond market for additional funding. Forney estimates that there is a 5.3 percent chance that the fund would need more than that $8 billion in one storm season. "The Cat Fund has enough money; the Cat Fund is in a relatively good position," said Forney.

The improving financial outlook means that the Cat Fund is finally in a position to handle all of its coverage obligations under the so-called mandatory layer. This is the reinsurance that all carriers in Florida are required to purchase.

The $4.1 billion shortfall now only applies to the highest layer of coverage known as the Temporary Increase in Coverage Limit. This is an optional coverage for insurers that many private carriers chose not to purchase this year. Currently, the largest customer of this highest layer is the state-created Citizens Property Insurance Corp.

Nicholson noted that between its cash and $11 billion bonding capacity, the Cat Fund could probably handle a storm along the size of Hurricane Andrew. He also pointed out that the Cat Fund would always seek to borrow the full amount of money needed to reimburse insurers.

But he said the real danger from the shortfall is that it could prevent the Cat Fund from being able to fully reimburse insurers in a timely fashion, putting them in possible danger of insolvency.

Nicholson also warned that while the fund could likely withstand a major hurricane or an active storm season, it could not handle back-to-back storm years like 2004 and 2005.

"We are basically right now a one-storm wonder," said Nicholson.