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, 2019, in compliance with the requirements of subparagraph 215.555(4)(c)2., Florida Statutes. These estimates relate to the 2019-2020 Reimbursement Contract Year, and assume enactment into law of CS/CS/CS/HB 301, which increases the FHCF loss adjustment expense allowance from 5% to 10% of FHCF covered losses on contracts effective on or after June 1, 2019. For May 2019, based on an estimated borrowing capacity of $8.6 billion, $12.4 billion projected year-end cash balance, and a preliminary risk transfer placement of $1.0 billion, the Fund’s total estimated claims-paying capacity over the next 12 months is $22.0 billion, which amount exceeds the $17 billion limit on the Fund’s single-season obligations as specified by subparagraph 215.555(4)(c)1., Florida Statutes, for the contract year. The borrowing capacity estimate is dependent on many factors, such as the credit rating of the debt, the amount of emergency assessments available for funding the debt, 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 projected year-end balance available for reimbursement of participating insurers on December 31, 2019, is estimated to be $12.4 billion, which represents the amount of assets available to pay claims resulting from Covered Events which may occur during the June 1, 2019 through May 31, 2020 Contract Year, not including any bond proceeds. The estimated claims-paying capacity consists of the estimated borrowing capacity, the projected year-end cash balance, and reinsurance. Additional liquidity is provided by $1.65 billion from Series 2013A and Series 2016A pre-event bonds. The projected year-end fund balance of $12.4 billion reflects losses and loss reserves from Hurricane Irma (2017), which the FHCF’s consulting actuary has estimated to be $3.75 billion, and losses and loss reserves from Hurricane Michael (2018), which the FHCF’s consulting actuary has estimated to be $1.45 billion. Greater detail may be obtained in the May 16, 2019 Claims-Paying Capacity Estimates Report, which can be found on the Fund’s website at www.sbafla.com/fhcf/ under “Bonding Program.” The Board recognizes that its good faith estimates are subject to changing market conditions that 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.
