TALLAHASSEE — With the start of hurricane season a month and a half away, state officials learned Tuesday that the projected shortfall in money available for Florida's hurricane catastrophe fund is about $5 billion less than projected.
The reason: A stronger credit market could allow the fund to sell bonds of up to $8 billion, not $3 billion, as previously projected.
"The picture is definitely better than it was," said Ash Williams, who oversees the fund as executive director of the state Board of Administration. "The bond market has loosened up a little bit."
Williams said that after taking into account inflation since 1992, the Cat Fund could absorb a catastrophic storm on the magnitude of Hurricane Andrew, which devastated parts of south Miami-Dade County in 1992.
Williams told the fund's four trustees, Gov. Charlie Crist and the elected Cabinet members, that total resources available to the Cat Fund, which has about $15.5 billion on hand, are now sufficient to cover damages of between $20 billion and $24 billion.
Last fall, the global financial crisis dramatically reduced the borrowing capacity of the Cat Fund, which is authorized to issue up to $28 billion in back-up insurance for companies unable to pay claims after a monster storm. Back then, a team of financial advisers estimated a shortfall of up to $18 billion.
But times have changed, and Williams noted that California, the state with the worst bond rating in the country, last week sold $6 billion worth of bonds.
"They think the markets are loosening up," Chief Financial Officer Alex Sink said. "That's good news. Very good news."
Not everyone sees it that way.
An insurance industry spokesman said an expansion of the Cat Fund's borrowing capacity could mean trouble for consumers in the form of higher assessments on their policies.
"That is still borrowed money and it must be paid back, and the way it is paid back is by taxing every Florida insurance consumer," said William Stander of the Property and Casualty Insurance Association of America.
In a related matter, Williams said he and Insurance Commissioner Kevin McCarty will return to Washington next week to meet with the state congressional delegation and Obama administration officials in an effort to secure a federal credit guarantee to further shore up the state's hurricane-cost defenses. Louisiana, Texas and California, all of which have catastrophe funds, are also part of that effort, he said.
Sen. Bill Nelson's office indicated last week that the U.S. Treasury Department was opposed to extending the state a line of credit, and that new federal legislation might be required to get it done.
Information from the News Service of Florida was used in this report. Steve Bousquet can be reached at email@example.com or (850) 224-7263.