FCHF Advisory Council Meeting Report: October 14
Oct 15, 2008
During the Florida Hurricane Catastrophe Fund (“FHCF”) Advisory Council (“Council”) meeting held October 14, 2008, FHCF financial advisors informed Council members that the FHCF would not be able to meet its total financial obligations in certain circumstances because of its lack of bonding capacity. To view the meeting materials, click here.
FHCF advisors presented the Council with an Estimated Loss Reimbursement Capacity Report (“Report”) that outlined the FHCF’s cash balance, its pre-event liquidity resources and the estimated amount the FHCF would be able to raise post-event.
According to the Report, the FHCF would be able to reimburse insurers for $11.786 billion of its $27.8 billion obligation in the next six months or $13.286 billion over the course of a year. To reach that number, the FHCF financial advisors took into account the FHCF’s cash balance of $2.786 billion, its estimated pre-event liquidity of $7.5 billion, and its post-event borrowing capacity of $1.5 billion in the next six months or $3 billion of borrowing capacity over the next year.
Financial advisors blamed the FHCF’s inability to access post-event financing that would enable it to meet its total obligations on a downturn in the global financial markets.
During a very brief question and answer portion of the presentation, Jack Nicholson, the FHCF’s senior advisor, said that the FHCF would consider the use of reinsurance, but likely not purchase it.
During the presentation, John Forney of Raymond James, a financial advisor to the FHCF, emphasized that the FHCF is responsible for reimbursements to insurers, meaning that, after an event, the FHCF is not required to pay its total obligation at one time, but rather as insurers submit claims for reimbursement. Mr. Forney also stated that the FHCF has more liquidity now than ever before and may be able to bond over time as a result.
At the conclusion of the presentation the Advisory Council approved the bonding estimates.
Should you have any questions or comments, please do not hesitate to contact Colodny Fass.
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