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Cat Fund Can Handle "Wilma-Plus" |
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05/15/2008 |
The Florida Hurricane Catastrophe Fund Advisory Council adopted the 2008 bonding estimates on May 14, 2008.
Raymond James and Associates, financial advisors to the fund, estimate the Fund’s total multi-year claims-paying capacity to be $53.418 billion (down $2.028 billion from the earlier October 2007 estimate of $55.446 billion).
The maximum single-season statutory claims-paying capacity of $29.130 billion is available under current market conditions for the initial season and $22.885 billion is available for the subsequent season under current market conditions.
The Cat Fund’s cash balance for 2008 is estimated to be $3.622 billion
If the damages from a single storm or series of storms exceed the funds currently available, additional bonding in the amount of $25.508 billion would be needed.
The single-season aggregate limit of the Fund is $29.130 billion.
John Forney, consultant with Raymond James and Associates, special financial advisors to the Cat Fund, reported to the Advisory Council that current market conditions are sufficient to yield the maximum single-season statutory claims-paying capacity of $29.130 billion.
Forney also said that current market conditions would yield $22.885 billion in capacity for the subsequent season.
The estimated claims-paying capacity in the initial and subsequent seasons comes from a combination of the projected year-end fund balance ($3.622 billion and $1.349 billion, respectively) and available bond proceeds ($25.508 billion and $21.536 billion, respectively).
Realizing this capacity would require an ongoing assessment of 5.35% related to the initial season and 4.65% related to the subsequent season (totaling 10.00% for both seasons).
The calculations take into account the current ongoing 1 percent emergency assessment which is set to expire in 2012.
For this analysis, TICL and Limited Apportionment reinsurance premiums were used as part of the projected fund balance, but TEACO reinsurance premiums were not because no participating insurer selected this coverage option last year.
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