BRADENTON, Fla. - Florida expects on about July 11 to defease $675.9 million of bonds that paid for hurricane losses, according to a market notice.
Defeasing the bonds will allow the Florida Hurricane Catastrophe Fund to remove earlier than anticipated a 1.3% assessment collected on homeowners-and auto-insurance policies in the state since the debt was issued in 2010.
The governor and Cabinet approved the early defeasance at their June 17 meeting.
To defease the bonds, the Cat Fund will use revenues from the 1.3% assessment that have been higher than expected because of an increase in the number of policies, and funds set aside for $500 million in claims that were anticipated but did not come to fruition, officials said.
The funds will be used to purchase Treasury securities and placed into escrow for the payment of the bonds, which mature in 2015 and 2016.
The state-run Florida Hurricane Catastrophe Fund Finance Corp. - now known as the State Board of Administration Finance Corp. - issued the $675.9 million of bonds in 2010 to cover property insurance losses caused by hurricanes.
The Cat Fund experienced extraordinary losses from four hurricanes in 2004 and another four hurricanes in 2005, and it can take years to settle claims.
For 2004, the fund paid $3.86 billion in losses. In 2005, some $5.72 billion in claims were expected to be paid, according to the 2013 audit.
In addition to the 2010 bonds, the Cat Fund issued $1.35 billion of bonds to pay losses in 2006, which matured July 1, 2012. In 2008, $625 million of bonds were issued with maturities in 2013 and 2014.
Bonds that are issued after a hurricane strikes are repaid through special assessments on policies, and other funds of the agency.
In 2013, $2 billion of taxable bonds were issued as pre-event financing to provide liquidity for paying claims if necessary during future hurricane seasons. The bonds have maturities in 2016, 2018, and 2020, and are repaid through investment earnings on the proceeds and premiums.
The bonds are rated AA by Fitch Ratings, Aa3 by Moody's Investors Service, and AA-minus by Standard & Poor's.
The Cat Fund was created in 1993, a year after Hurricane Andrew slammed south Florida, to stabilize the property insurance market. The fund provides low-cost reinsurance to the private market and the state-run Citizens Property Insurance Corp.