BRADENTON, Fla. - Florida's Citizens Property Insurance Corp. expects to issue $1 billion in tax exempt notes in mid-May to provide liquidity for the upcoming hurricane season.
If the state is hit by a hurricane, the pre-event borrowing will provide additional cash on hand to quickly pay the claims of policyholders who live along the high-risk coastline. Otherwise, the proceeds will be invested.
Citizens' board of governors on April 7 approved moving forward with the offering. The hurricane season officially begins June 1 and runs through Nov. 30.
While the structure of the upcoming deal has not been determined, the agency is considering a mix of tax-exempt, fixed rate securities with maturities between 3 and 10 years, and 3-year floating rate notes.
The state-run, nonprofit insurer-of-last-resort currently has about $2.6 billion of outstanding pre-event bonds that were issued to provide liquidity, but $490 million of that debt matures in June and $1.7 billion matures over the next two years.
Citizens' coastal account bonds are currently rated A2 by Moody's Investors Service, and A-plus by Fitch Ratings and Standard & Poor's.
Three senior managers working on the deal are Bank of America Merrill Lynch, book-runner for the fixed-rate bonds, floating-rate note manager JPMorgan, and Citi.
Co-managers are Jefferies LLC, Morgan Stanley, Ramirez & Co. Inc., RBC Capital Markets, Stifel, Nicolaus & Co., and Wells Fargo Securities.
Raymond James & Associates Inc. is the financial advisor. Bond counsel is Greenberg Traurig. Disclosure counsel is Bryant, Miller and Olive P.A.
In addition to the upcoming bond deal, Citizens is also pursuing risk transfer agreements through traditional reinsurance and using catastrophe bonds, according to chief financial officer Jennifer Montero.
Last month, the state-run Florida Hurricane Catastrophe Fund said it needs about $2.2 billion for its own liquidity needs for the upcoming season. The Cat Fund is in the process of determining if it will issue taxable municipal bonds or transferring a portion of its risk via reinsurance from the private sector, or use a combination of both.
