Florida Plans to Issue Bonds to Support Hurricane Losses Fund

Florida is taking significant financial steps to reinforce its capacity to handle hurricane-related insurance claims. The state plans to borrow up to $3.8 billion, primarily through the sale of municipal bonds, to strengthen the Florida Hurricane Catastrophe Fund. This state-operated fund plays a crucial role in reimbursing property insurers for losses incurred due to hurricanes. The decision, as reported by Bloomberg, indicates a proactive approach to fortify the state’s insurance sector, which has faced challenges following Hurricane Ian in 2022.

The Florida State Board of Administration has filed a securities filing to generate at least $1.5 billion from this bond sale. These funds will replenish the Florida Hurricane Catastrophe Fund, enhancing its capacity to provide financial support in the event of significant storm events. This move is part of Florida’s broader strategy to maintain a stable insurance market, especially considering the state’s vulnerability to hurricanes.

Notably, this is not the first time Florida has resorted to bond issuance for its catastrophe fund. Following the costly impacts of Hurricane Ian, which led to the closure of several property insurers and an increase in lawsuits, the Florida Insurance Guaranty Association issued bonds for the first time in three decades. The current bond sale, according to Gina Wilson, COO of the Fund, will secure additional capital at a fixed interest rate, ensuring quick access to funds when needed.

Ben Watkins, Florida’s director of bond finance, clarified that this bond issuance is a precautionary measure and will not result in assessments on member insurers. Morgan Stanley is identified as the lead underwriter for the bond sale, expected to be priced as early as March. Since Hurricane Ian, the fund has disbursed $1.9 billion in reimbursements, with anticipated payments of $8.1 billion by 2028, including for Hurricanes Irma and Michael.