Fla. Cat Fund Selling Bonds To Pay Wilma Claims

Florida ’s Hurricane Catastrophe Fund will sell additional bonds to repay higher than expected claims costs resulting from 2005’s Hurricane Wilma, officials said.

The additional bonds will raise $625 million for the fund, according to Dennis MacKee, a spokesman for the Florida State Board of Administration that oversees the Catastrophe Fund. “We hope to issue the bonds some time in July,” he said.

Mr. MacKee said the need to sell additional bonds does not signal any problems with the fund’s current financial picture or ability to pay claims as the fund works on a post-event system to cover its losses.

The SBA, he said, has already issued $1.35 billion in bonds for claims relating to the 2005 hurricane and sought to sell additional bonds to cover any remaining or reopened claims.

Bonds that have already been issued are being funded by a 1 percent surcharge on policies sold in the state that had been set to expire in 2012.

Those surcharges are applied to car, boat, home and business insurance coverage. Mr. MacKee said that to pay for the additional bonds, the surcharge would now remain in effect until 2014.

Sam Miller, a spokesman for the Florida Insurance Council, agreed that the bonds were related solely to past expense.

“This is about clearing up the 2004-2005 seasons,” he said, “and probably primarily about Hurricane Wilma.” Hurricane Wilma caused more than $10 billion in insured losses, according to the Insurance Services Office Inc.

Mr. Miller said that one of the reasons claims have outpaced reserves is a rise in public adjusters “aggressively advertising” their services to homeowners as a means to collect more money from insurers. “That’s a lot of it,” he said.

Even when claims that involve public adjusters fail to hold up as legitimate, insurers must still pay to investigate and perform their due diligence, said Mr. Miller.

Even though such claims would raise a number of questions—particularly those that are reopened after a homeowner has accepted a settlement—an insurer can’t unilaterally deny them, “or you’re going to get sued,” he explained.