Florida heads to market with $1.5B taxable CAT bond sale

Florida is coming to market early this week with a $1.5 billion taxable bond sale to bulk up the state’s

In Florida, participation in the fund is mandatory for almost all residential property insurers; the fund’s liability is statutorily limited.

This was the first time KBRA rated the credit.

KBRA said its AA rating reflected the CAT fund’s “strong debt repayment capabilities, which derive from its ability to levy assessments on almost all property and casualty insurance policies statewide.

“Assessments, if levied, are charged directly to policyholders and, while subject to single-year and annual aggregate limits, can be collected for as long as bonds are outstanding,” KBRA said.

KBRA said consistent growth in fund’s broad assessment base, which in 2022 totaled $72.6 billion, is attributable to growth in the state’s population as well as to rapid increases in insurance premiums in recent years.

“Assessments are levied on over 90% of property and casualty insurance premiums statewide. Auto insurance, homeowner policies and all other lines have comprised, on average, 41%, 20% and 39% of the assessable base, respectively, since 2013.” KBRA said.

The agency noted the fund’s assessment mechanism was successfully tested from fiscal 2007 through fiscal 2015 and is expected to function even while the state is recovering from a catastrophic event.

“Assessments, which are highly enforceable, may be levied without legislative approval for as long as bonds are outstanding, at up to 6% of annual premiums for losses attributable to a single year, subject to a 10% cap for aggregate assessments from storm losses in multiple years,” KBRA said.

“We are really excited about the deal coming to market now,” he said, “We had some volatility in the markets after that hot consumer price index number coming in, but the Treasury market has improved since then and the market seems to be functioning just fine.”