“Bonding needs of this size are extremely large by market standards,” says Raymond James, which asked four financial-services firms to estimate the FHCF's bonding capacity over the next 12 months.

The average of the estimates from the firms—Citi, Barclay's, Goldman Sachs and JP Morgan—is $8 billion, leaving a $3.2 billion deficit.

Beyond the cash balance, Florida policyholders will end up shouldering the bill via assessments to pay the debt.

The Heartland Institute, a public policy think tank, says the $8 billion post-event bonding capacity estimate may be optimistic. Goldman Sachs, for instance, says the FHCF could raise just $5 billion in the capital markets.

Heartland, a promoter of free-market policies, has long opined about the harmful effects of past legislation intended to artificially keep homeowners' rates down. R.J. Lehmann, deputy director of Heartland's Center on Finance, Insurance, and Real Estate, says the “flaws of that strategy are becoming more and more evident by the day.”

He adds, “Florida must allow risk-based rates to prevail, both for primary insurance and reinsurance, or face the potential of claims the state simply cannot afford to pay.”

Jack Nicholson, chief operating officer of the FHCF, says a shortfall following a weather disaster in Florida could have “severe consequences” in the state's property-insurance market. Every insurer, by law, has to purchase reinsurance coverage—typically at a lower rate than the private market—from the fund. Some do more than others.

“There's the potential that companies will not be able to pay claims because the coverage they relied on the [catastrophe fund] for does not exist,” he says.

However, Nicholson insists the state's “very hazardous” consistent reliance on the bond market to pay claims can be remedied.

Nicholson says he has two sponsors for a bill to right a ship that has not been righted since legislation in 2007 left the state over-exposed and overly dependent on fickle economic climates.

“We don't have to face that risk,” Nicholson insists. His bill would gradually get rid of $5 billion of the fund's mandatory layer. An optional layer is already being phased out—a product of recent legislation.

That would leave the fund with a capacity of $12 billion, and Nicholson says it “shouldn't be a question” whether the FHCF can fund it.

Another hurricane season could pass without a landfall in Florida. If that's the case, the FHCF will have $8.4 billion in cash for next season. It is feasible to fund the rest of the fund's obligations with bonds.

“We're trying to be more financially responsible,” Nicholson says.

The plan would transfer more risk to the private-insurance markets.

Dennis Burke, vice president of state relations for the Reinsurance Association of America, says Florida's hurricane risk “is insurable in the private sector, and the RAA supports efforts to transfer that risk from taxpayers to the global insurance and reinsurance markets.”

He adds, “Reinsurers have the capacity and willingness to assume more Florida risk, which will protect Florida's taxpayers and help insurers meet their promises to Florida's consumers.”