Florida Hurricane Catastrophe Fund bonds
Borrowings by Florida's public hurricane reinsurance fund, raised before or after a storm and repaid from premiums and from emergency assessments on the state's policyholders.
The Florida Hurricane Catastrophe Fund, created in 1993 after Hurricane Andrew, reimburses the state's insurers for part of their hurricane losses above a retention, in exchange for a reimbursement premium. Its cash is not enough to pay for a major season, and it transfers almost nothing to the market: it borrows. Post-event bonds are issued after the storm and repaid over years through an emergency assessment added to most property and casualty premiums in the state, which makes every Florida policyholder pay for the catastrophe. Pre-event bonds are raised before the season, to hold cash without depending on the condition of the bond market the day after a hurricane. The mechanism is therefore not risk transfer: it spreads the loss over time and pools it at the state level, and its real capacity depends on what markets are willing to lend after the shock.
Authorized in January 2013 by the governor and Cabinet, the FHCF issued 2 billion dollars of taxable pre-event revenue bonds (Series 2013A) in April 2013 through the State Board of Administration Finance Corporation, secured by reimbursement premiums and emergency assessments, with no debt service reserve account.
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