The state corporation that oversees the Florida Cat Fund is planning to borrow as much as $3.8 billion to ensure the fund has plenty of money on hand to reimburse property insurers for losses when homes are damaged or destroyed by hurricanes.
The Florida State Board of Administration Finance Corp. said in a securities filing Jan. 19 that it expects to sell the bonds to raise money for the Florida Hurricane Catastrophe Fund, known as the Cat Fund. It marks the state’s latest effort to ensure that it can backstop its insurance industry, which has been grappling with a surge of claims, lawsuits and insolvencies in recent years.
“This is a want-to-have, not a need-to-have,” said Ben Watkins, Florida’s director of bond finance since 1994. He added that the debt sale would not require any assessment on member insurers.
The bond sale notice comes seven months after another state program, the Florida Insurance Guaranty Association, which handles the claims of insolvent insurers, sold $600 million in bonds to help support insurance claims. The state agency faced higher costs after Hurricane Ian in 2022 and a deluge of lawsuits forced property insurers to close.
The Cat Fund bond sale wasn’t prompted by a specific hurricane. Proceeds will replenish funds from debt issued in 2020 that will mature in 2025, and give the fund “additional capital at an established interest rate and the ability to access funds quickly in the event of a significant storm event,” said Gina Wilson, chief operating officer of the Florida Hurricane Catastrophe Fund, in an emailed statement.
Four years ago, corporation borrowed more than $2 billion for the catastrophe fund to take advantage of low interest rates.
The fund’s net position fell $8.2 billion for the fiscal year ended June 30, 2023, according to a report. Since Hurricane Ian in 2022, the fund paid $1.9 billion in reimbursements to insurers for that period, and estimates, based on current reporting by insurers, an additional $8.1 billion in reimbursements will be paid through 2028, the report said. The fund is also still making payments for Hurricanes Irma and Michael, which hit the state in 2017 and 2018, respectively.