Florida Hurricane Catastrophe Fund Issues Estimated Claims-Paying Capacity, Projected Balance as of December 31, 2014
May 27, 2014
In compliance with s. 215.555(4)(c)2., F.S., Florida’s State Board of Administration (“SBA”) has published the estimated borrowing capacity, estimated claims-paying capacity and projected balance of the Florida Hurricane Catastrophe Fund (“FHCF”) as of December 31, 2014.
Issued today, May 27, 2014, these estimates relate to the 2014-2015 FHCF Reimbursement Contract Year. The FHCF’s projected post-event borrowing capacity estimate is $8.3 billion for May 2014.
Given the current state of the financial markets, the SBA indicated that its borrowing capacity estimate is dependent on many factors, such as: the size of an event or events, 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 FHCF’s estimated borrowing capacity and projected available year-end cash balance (which includes the proceeds of the Series 2013A Pre-Event Bonds) provide it with a total estimated claims-paying capacity of $21.250 billion over the next 12 months, although the statutory limit is only $17 billion.
Greater detail can be obtained in the “May 15, 2014 Claims-Paying Capacity Estimates” Report, which can be accessed by clicking here.
The FHCF’s obligation for the payment of reimbursable losses is limited in s. 215.555(4)(c)1., F.S., and shall not exceed its actual claims-paying capacity, up to the statutory maximum of $17 billion for this Contract Year.
The projected year-end balance available for reimbursement of participating insurers on December 31, 2014 is estimated to be $10.950 billion, which represents the amount of assets available to pay claims, not including any bond proceeds, resulting from Covered Events that may occur during the June 1, 2014 through May 31, 2015 FHCF Contract Year.
Given the FHCF’s projected year-end cash balance of $10.950 billion and the additional liquidity provided by the $2 billion of pre-event bonds that were issued in April 2013, the FHCF has a total of $12.950 billion in liquid resources. Therefore, it would need to issue only $4.05 billion in revenue bonds to fund its $17 billion statutory limit.
In its Notice today, the SBA reminded that financial market conditions may be different if and when the SBA determines the necessity of issuing revenue bonds. It also cautioned that participating insurers relying on these estimates should recognize the potential impact the financial markets can have on the FHCF’s claims-paying ability and plan accordingly.
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