The board that invests state money is delaying a bond issue meant to shore up Florida’s backup Hurricane Catastrophe Fund, waiting until financial markets stabilize before completing the bond sale.
The state Board of Administration said last week it will hold off on the state’s largest bond deal to date, hoping to find a better rate on the bonds.
Officials didn’t set a date for issuing the bonds, but bond market observers have said credit markets will likely settle after Labor Day.
The Catastrophe Fund provides backup coverage to insurers and is tapped in the event of a large hurricane for which private companies don’t have enough to money to cover claims. But the Catastrophe Fund itself doesn’t have enough cash to cover the worst-case scenario, and the board voted last month to issue bonds to raise cash.
If a large hurricane hits and the Catastrophe Fund doesn’t have enough to cover its obligations, Floridians could see assessments on their home, auto and other types of insurance to make up the shortfall.
The Catastrophe Fund was expanded this year to offer more reinsurance to the private market, in an effort to bring down the cost of private home insurance. Insurance companies say the expense of private reinsurance is one of the major drivers of high property insurance costs.
The state is hoping to raise up to $7 billion to shore up the Catastrophe Fund with the bond sale. The catastrophe fund has $3.8 billion cash on hand now and will have $5.2 billion by the end of the year. However, the state would be liable for up to $28 billion if a major storm or a series of major hurricanes hits.
Information from: St. Petersburg Times, http://www.sptimes.com
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