Florida officials said Monday they are considering borrowing as much as $5 billion to make sure the Hurricane Catastrophe Fund will have enough to pay claims in the event of a large hurricane.
The state Board of Administration, which includes Gov. Charlie Crist, Attorney General Bill McCollum and Chief Financial Officer Alex Sink planned to meet Tuesday to discuss options for making sure the fund is sound enough to cover losses in the event of a big hurricane.
Among other ideas that have been discussed are having the Catastrophe Fund buy additional backup reinsurance, something that Sink in the past said may be too expensive.
Sink said Monday that borrowing is a good option because even though it will cost the state money in interest, Florida can invest the money if it’s not needed, and the interest income may cover the amount the state must pay.
The Catastrophe Fund, which is primarily paid for by premiums paid by insurance companies, pays claims above what the private insurance companies must pay. Lawmakers this year expanded the fund, known as the Cat Fund, to put the state on the hook for more losses, in an effort to reduce the cost of private wind coverage for Florida homeowners.
The fund has about $5 billion on hand from premiums paid by private insurers and money borrowed last year. Sink said the state might need to borrow up to $5 billion more to be able to cover the largest storms.
“We want to be able to be sure that we have a lot of cash on hand in the event that we have a hurricane,” Sink said. “So the proposal … is to give our staff the authority to go out and negotiate to borrow some money so that we’ll have several billion dollars in our Cat Fund checking account in the event of a storm.”
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