The Florida Hurricane Catastrophe Fund holds $17.5 billion in liquid assets, enough to meet its statutorily mandated reserves with $500 million left over, administrators said Tuesday.
Furthermore, the fund, a backstop to the state’s property insurance companies, can easily go to the financial markets to raise money if Florida suffers storm damage sufficient to strain its reserves.
That, according to a report delivered during a meeting of the fund’s advisers in Tallahassee.
“The bottom line is, the Cat Fund is in the best financial position we’ve been in,” said Anne Bert, the fund’s chief operating officer. “We’ve got liquid resources. Our maximum capacity by law is $17 billion. We’ve got that covered with a little bit extra.”
The fund had the luxury of 11 years without a major storm to build its reserves. A major storm — or a series — could change the picture, Bert told the advisers.
“I can’t foresee what large storm could happen, but it could be a major one, and we could get an assessment quicker than we like,” she said.
According to the report prepared by Raymond James, Cat Fund bonds are rated AA by Standard & Poor’s and at similar levels by the other rating agencies. The fund’s ability to charge emergency assessments to all property and casualty insurance lines is worth more than $41 billion.
State law limits those assessments, but they’re worth as much as $2.49 billion during a single year, and $4.15 billion over two, the report said.
“These annual amounts … are estimated to be more than sufficient to support enough bonds to enable the [fund] to meet its maximum initial season obligations and subsequent season coverage as well,” the report said, absent any market meltdown.
If the fund leaves its current bond load outstanding, its exposure under its contracts with Florida insurers should max out at $2.2 billion, the report continued.
“Bonding needs of this size are not very large by municipal market standards,” the report says.
“From a market perspective, from an interest rate perspective, if we need to go into the market we can,” said Kapil Bhatia of Raymond James.
At last word, Hurricane Hermine had caused $95 million and Hurricane Matthew $454 million in insured losses, according to Florida Department of Insurance Regulation records.
Neither storm has caused insurance companies to ask the fund for help, Bert said. But administrators were closely monitoring the situation.
Donald Brown, a lobbyist who represents the reinsurance industry on the panel, said one insurance executive he’s spoken to reported receiving 1,025 Hermine-related claims but only seven assignment of benefits agreements.
Those “AOBs,” contracts assigning insurance losses to third parties such as contractors, especially in South Florida, are widely blamed for inflating repair costs, insurance losses, and premiums.
“Apparently some of the AOB actors haven’t discovered North Florida yet,” Brown said.
The Legislature created the fund in 1993, after Hurricane Andrew destroyed much of South Florida the year before.
Other members of the advisory panel represent property insurers and consumers. The panel also includes an actuary and a meteorologist (although that last position is vacant).