The State Board of Administration Finance Corp. in Florida is gearing up for a $1.5 billion taxable bond sale to bolster the state’s Hurricane Catastrophe Fund. Initially planning to issue five-, seven-, and 10-year maturities with $500 million in each tranche, the decision was made to only offer $500 million in five-year bonds and $1 billion in 10-year bonds. The shift to longer-dated bonds was attributed to the need for more long-term permanence.
Morgan Stanley is set to price the taxable Series 2024A revenue bonds with BofA Securities, J.P. Morgan, and Wells Fargo as co-senior managers. The deal is rated Aa3 by Moody’s Ratings and AA by S&P Global Ratings, Fitch Ratings, and Kroll Bond Rating Agency. The stable outlook on the credit indicates confidence in the bond’s security.
The proceeds from the bond sale will be utilized to make reimbursement payments to insurers for covered losses caused by any future catastrophic events. The bonds are backed by reimbursement premiums collected from residential property insurers in Florida, emphasizing the fund’s commitment to stability in the residential property insurance marketplace.
The Florida Hurricane Catastrophe Fund serves as a vital component in promoting stability in the state’s residential property insurance market. Assessments can be levied on almost all property and casualty insurance policies statewide, ensuring strong debt repayment capabilities. The fund’s robust assessment mechanism has been successfully tested and is expected to function effectively during recovery from catastrophic events.
This bond sale marks the first time that KBRA has rated the Florida Hurricane Catastrophe Fund. The AA rating reflects the fund’s ability to levy assessments on insurance policies statewide, providing a secure source of reimbursement for insurers. KBRA acknowledges the fund’s consistent growth in assessment base, attributing it to population growth and increases in insurance premiums.
The $1.5 billion taxable bond sale by the Florida Hurricane Catastrophe Fund represents a significant step towards enhancing the state’s resilience to future catastrophic events. With a focus on longer-dated bonds and strong ratings from multiple agencies, the fund’s commitment to stability in the residential property insurance market is evident. The successful execution of this bond sale will further solidify the fund’s position as a reliable source of reimbursement for insurers in times of need.