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Bonds to supplement storm fund

The state will begin issuing a ''floating rate note'' that will build up the cash reserves of the Catastrophe Fund.

By JENNIFER LIBERTO
Published July 18, 2007

TALLAHASSEE - The State Board of Administration on Tuesday took a step toward making sure there's more cash available to start paying claims if hurricanes hit the state.

When the state decided to cut insurance rates earlier this year by drastically expanding the state-financed Catastrophe Fund, they increased the amount of money that the fund might have to pay in a bad storm season to about $28-billion.

The Catastrophe Fund only has access to about $3.8-billion in cash right now but will later have access to $5.2-billion by December.

To help buoy current cash reserves, the state will start issuing a special bond, called a "floating rate note," which would provide an additional $3-billion to $5-billion in cash, according to state records. The board will finalize the issuing of the bonds at its next meeting, July 31.

"If we have a big storm, we've got the money to pay to make sure our people are covered," Gov. Charlie Crist said after the board meeting. "We have a fair amount we have now, but this gives the state the opportunity to back it up."

That extra money from the bonds would not be available until September, said John Forney, a Raymond James consultant on the CAT fund.

Insurers have said they're concerned about the state's ability to pay claims quickly and have started buying a special kind of private reinsurance that will provide them with quick cash in the event the CAT fund has trouble paying out to insurers on time. They also plan to pass on the cost of that reinsurance to policyholders in rates.

Crist's top legal adviser, Chris Kise, said this bond measure should give the Office of Insurance Regulation a tool to challenge those types of reinsurance policies.

"This should alleviate any concerns, whether legitimate or otherwise, about the CAT fund's ability to meet its obligations," Kise said.

[Last modified July 18, 2007, 01:11:27]