Florida Hurricane Catastrophe Fund Issues October 2015 Estimated Claims Paying Capacity Report
Oct 28, 2015
Florida’s State Board of Administration (“SBA”) has posted its statutory October report on the estimated borrowing capacity, estimated claims-paying capacity and projected balance of the Florida Hurricane Catastrophe Fund (“FHCF”) as of December 31, 2015. These estimates relate to the 2015-2016 FHCF Reimbursement Contract Year.
Based on an estimated borrowing capacity of $7.6 billion, $12.7 billion projected year-end cash balance, $1 billion of reinsurance and $2 billion of Series 2013A pre-event bonds, the FHCF’s total estimated claims-paying capacity over the next 12 months (without the $17 billion statutory limitation) is $23.3 billion.
The issuance of $1.2 billion of pre-event bonds, authorized by resolution of the SBA on April 14, 2015, would use part of the estimated post-event borrowing capacity and potentially reduce the remaining post-event borrowing capacity available to $6.4 billion.
The 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, 2015, is estimated to be $12.7 billion, which represents the amount of assets available to pay claims resulting from Covered Events which may occur during the June 1, 2015 through May 31, 2016 FHCF Contract Year, not including any bond proceeds.
The SBA’s obligation for the payment of reimbursable losses is limited by law and shall not exceed the actual claims-paying capacity of the FHCF, up to the statutory maximum of $17 billion for this FHCF Contract Year.
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.
Click here to access the October 2015 FHCF Claims-Paying Capacity Estimates Report, which was published today, October 28, 2015.
The SBA noted that its good faith estimates are being made while volatile global financial market conditions exist. 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 who 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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