Florida Hurricane Catastrophe Fund Advises on Estimated Borrowing, Claims-Paying Capacity, Projected Balance
Jun 7, 2017
The Florida Hurricane Catastrophe Fund (“FHCF”) advised today, June 7, 2017, on its estimated borrowing capacity, estimated claims-paying capacity, and projected balance as of December 31, 2017 in compliance with the requirements of Section 215.555(4)(c)2., Florida Statutes. These estimates relate to the FHCF’s 2017-2018 Reimbursement Contract Year.
For May 2017, based on an estimated borrowing capacity of $8.1 billion, $14.9 billion projected year-end cash balance, and $2.7 billion of Series 2013A and Series 2016A pre-event bonds, the FHCF’s total estimated claims-paying capacity over the next 12 months is $25.7 billion, which amount exceeds the $17 billion limit on the FHCF’s single-season obligations as specified by Section 215.555(4)(c)1., Florida Statutes for the FHCF Contract Year.
The FHCF stated that its borrowing capacity estimate is dependent on many factors, such as the credit rating of the debt, the amount of emergency assessments available for funding the debt, the limitations or constraints of the financial markets to absorb potential debt issuances, the time necessary to access such markets, and the existing level of interest rates at the time of issuance.
The projected year-end balance available for reimbursement of participating insurers on December 31, 2017 is estimated to be $14.9 billion, which represents the amount of assets available to pay claims resulting from Covered Events which may occur during the June 1, 2017 through May 31, 2018 FHCF Contract Year, not including any bond proceeds.
The estimated claims-paying capacity consists of the estimated borrowing capacity, the projected year-end cash balance, reinsurance, and pre-event bonds which can be used for liquidity. The estimates above do not take into account any potential losses from Hurricanes Hermine and Matthew, which affected Florida in September and October of 2016.
The FHCF noted that greater detail may be obtained in the May 18, 2017 Claims-Paying Capacity Estimates Report, and that the State Board of Administration (which oversees the FHCF) ” . . . recognizes that its good faith estimates are being made while volatile global financial market conditions exist, and therefore, changing market conditions can dramatically impact the Fund’s actual claims-paying capacity either positively or negatively. Current conditions may or may not be the same if and when the Board determines that it is necessary to issue revenue bonds. Participating insurers who rely on these estimates should recognize the potential impact the financial market can have on the Board’s claims-paying ability and plan accordingly.”
- Note: The FHCF Participating Insurers Workshop begins tomorrow, June 8, and runs through this Friday, June 9. For more information, click here.
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