Improved Markets Strengthen Hurricane Catastrophe Fund
State financial analysts say the state is better prepared for a major hurricane than a year ago thanks to a stabilizing financial market.
Advisers for the Hurricane Catastrophe Fund, which reimburses insurance companies facing extraordinary claims following a hurricane, are set to meet Tuesday and release the latest projections of the fund's bonding capability, and thus its ability to make pay outs in the event of a bad hurricane, or a series of big storms.
The fund has greatly expanded in the past few years, making it potentially more dependent on bonding if a Katrina-like hurricane should hit Florida.
Last year, as the markets crumbled, the fund's ability to bond diminished as well. In October 2008, CAT Fund analysts estimated that the fund would fall $15 billion short of its theoretical capacity of $28 billion.
It had about $10 billion in liquid assets, but could only bond up to about $3 billion, meaning the state could safely and efficiently handle minor events. But if a monster storm had hit the state at that time, CAT Fund officials would have struggled to come up with the money.
However, CAT Fund chief operating officer Jack Nicholson said the strengthening markets have turned the situation around. Plus, a combination of legislative action and decisions by insurers have decreased the state's obligation from about $28 billion to $23.17 billion.
“That kind of helped us out in the big picture,” Nicholson said.
A draft report by CAT Fund advisers states that the fund should be able to bond up to $11 billion under the current market conditions, making Nicholson and other state officials breathe a bit easier. That combined with current liquid assets, would give the fund $19 billion, only about $4 billion short of the theoretical capacity.
State officials traveled to Washington D.C. regularly over the past year to meet with members of the Florida congressional delegation to discuss potential federal options that could back up the CAT Fund. U.S. Sen. Bill Nelson, D-Fla. also pushed for legislation to help catastrophe funds nationwide after the U.S. treasury indicated that it was opposed to extending a line of credit to the state should it face a major hurricane.