Estimated Capacity
NOTICE IS HEREBY GIVEN by the State Board of Administration of Florida (the Board) of the estimated borrowing capacity, estimated claims-paying capacity, and projected balance of the Florida Hurricane Catastrophe Fund (the Fund) as of December 31, 2014, in compliance with the requirements of Section 215.555(4)(c)2., Florida Statutes. These estimates relate to the 2014-2015 Reimbursement Contract Year. The Fund’s projected post-event borrowing capacity estimate is $8.3 billion for May 2014. Given the current state of the financial markets, the borrowing capacity estimate is dependent on many factors, such as: the size of an event or events, the limitations or constraints of the financial markets to absorb potential debt issuances, the time necessary to access such markets, and the existing level of interest rates at the time of issuance. The estimated borrowing capacity and projected available year-end cash balance (which includes the proceeds of the Series 2013A Pre-Event Bonds) provide the Fund with a total estimated claims-paying capacity of $21.250 billion over the next twelve months, although the statutory limit is only $17 billion. Greater detail can be obtained in the “May 15, 2014 Claims-Paying Capacity Estimates” Report, which can be found on the Fund’s website at www.sbafla.com/fhcf/ under “Bonding Program.” The obligation of the Board for the payment of reimbursable losses is limited in Section 215.555(4)(c)1., Florida Statutes, and shall not exceed the actual claims-paying capacity of the Fund, up to the statutory maximum of $17 billion for this Contract Year. The projected year-end balance available for reimbursement of participating insurers on December 31, 2014, is estimated to be $10.950 billion, which represents the amount of assets available to pay claims, not including any bond proceeds, resulting from Covered Events which may occur during the June 1, 2014 through May 31, 2015 Contract Year. Given the projected year-end cash balance of $10.950 billion and the additional liquidity provided by the $2 billion of pre-event bonds that were issued in April 2013, the FHCF has a total of $12.950 billion in liquid resources, and would therefore need to issue only $4.050 billion in revenue bonds to fund its $17 billion statutory limit. The Board recognizes that its good faith estimates are being made while volatile global financial market conditions exist; therefore, changing market conditions can dramatically impact the Fund’s actual claims-paying capacity either positively or negatively. Current conditions may or may not be the same if and when the Board determines that it is necessary to issue revenue bonds. Participating insurers who rely on these estimates should recognize the potential impact the financial market can have on the Board’s claims-paying ability and plan accordingly.
