Florida Hurricane Catastrophe Fund Issues Estimated Claims-Paying Capacity as of December 31, 2016

Florida’s State Board of Administration of Florida (“SBA”) advised today, May 25, 2016, on the estimated borrowing capacity, estimated claims-paying capacity, and projected balance of the Florida Hurricane Catastrophe Fund (“FHCF”) as of December 31, 2016, in compliance with the requirements of Section 215.555(4)(c)2., F.S. 

These estimates relate to the 2016-2017 FHCF Reimbursement Contract Year.  For May 2016, based on an estimated borrowing capacity of $7.5 billion, $13.7 billion projected year-end cash balance, $1 billion of reinsurance, 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 $24.9 billion, which amount exceeds the $17 billion limit on the FHCF’s single-season obligations as specified by Section 215.555(4)(c)1., F.S., for the FHCF Contract Year. 

The SBA notes that the FHCF’s 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 FHCF Participating Insurers on December 31, 2016 is estimated to be $13.7 billion, which represents the amount of assets available to pay claims resulting from Covered Events which may occur during the June 1, 2016 through May 31, 2017 FHCF Contract Year, not including any bond proceeds. 

The FHCF’s 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. To access greater detail, click on the reports via hyperlink below:

• Estimated FHCF Claims Paying Capacity Summary
• Estimated Bonding Capacity Analysis Reports
• Official Statement – Series 2013A Revenue Bonds

The SBA notes that its good faith estimates are being made while volatile global financial market conditions exist, and therefore, changing market conditions can dramatically impact the FHCF’s actual claims-paying capacity either positively or negatively.  Current conditions may or may not be the same if and when the SBA determines that it is necessary to issue revenue bonds.  Participating Insurers that rely on these estimates should recognize the potential impact the financial market can have on the FHCF’s claims-paying ability and plan accordingly.

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