State searches for CAT fund options
Mar 10, 2009
Sarasota Herald Tribune--March 10, 2009
Under the deadline pressure of Florida’s looming hurricane season, Gov. Charlie Crist and other state officials are still scrambling to find a way to shore up the state hurricane catastrophe fund, which could come up billions of dollars short if a big storm hits this year.
This morning, Crist, CFO Alex Sink and Attorney General Bill McCollum directed state financial and insurance advisors to look at various options for backing up the fund, which may need to provide as much as $28 billion if Florida were struck by a Katrina-like storm.
Crist and other officials say their best option remains getting a backup financial guarantee from the federal government. On a trip to Washington last month, Crist met with U.S. Treasury Secretary Timothy Geithner about securing a federal loan or guarantee to back up bonds issued by the state’s so-called CAT fund.
“I think we have good prospects there,” Crist said.
Crist said questions remain whether the Treasury can extend the aid without changes in federal law. But he said he would continue to argue that the federal government should see the proposal as an organized way to deal with a potential catastrophe rather than coming in after a storm to provide help.
“I think what we need to do is to do it in a smarter way,” Crist said.
CFO Sink also said the state should look to the federal government for help.
“They are the only entity that can really write a check for $10 billion,” Sink said.
But she said the federal help would only be part of the solution, which will also include efforts to reduce the size of the CAT fund or to seek other financial support from the private market, including pre-storm bonds and private reinsurance.
“There is no single silver bullet here. This is a multi-pronged solution that we have to have,” Sink said. “None of these products are going to be cheap.”
Both Crist and Sink said they would prefer not to seek a guarantee similar to the support provided last year for the CAT fund by billionaire investor Warren Buffett. For $224 million, Buffett agreed to help finance $4 billion in bonds in the event of a storm during the 2008 season _ which never occurred.
Sink said she didn’t like the proposal last year “and I don’t like it this year.”