Florida may tap markets for $1.5bn to bolster depleted cat fund

The Florida Hurricane Catastrophe Fund could be bolstered to the tune of $1.5 billion at points in the first half of the year, still only a small fraction of the hit the fund took after Hurricane Ian. 

The Florida State Board of Administration Financial Corporation, which runs to markets on behalf of the state's cat fund, gave warning to investors that it “is considering the issuance of $1.5 billion or more.” The state board last authorised the unit to raise as much as $3.8 billion.

The new series "are currently expected to price in March or sometime thereafter" through a syndicate led by lead underwriter Morgan Stanley with BofA Securities, JP Morgan and Wells Fargo on as co-senior managers.

The fund was notably depleted by hurricane Ian in late 2022. The fund's net position decreased by 75%, or $8.2 billion, in the fiscal year through mid-2023. 

Liabilities rose by $7.5 billion year on year for losses from Hurricane Ian that were still lingering after the first $1.9 billion in payments. And the fund was still paying out for Hurricane Irma and Michale losses to the tune of $0.7 billion.

The Fund estimated, based on mid-2023 reporting by insurers, that an additional $8.1 billion in reimbursements will be paid through 2028.

The Florida agency last raised funds for the catastrophe fund in 2020, tapping markets for a total of $3.5 billion in pre-event financing, of which $1.25 billion will be due in 2025 and the rest split between 2027 and 2030 maturities.  

The Florida state issuer gave the full set of standard warnings about developments remaining contingent on market conditions et al. 

New papers would have a maximum maturity of 2034, maturing July 1 to match remaining outstanding tranches.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.