FMIT Issues $20 Million Bond For Hurricane Claims
A Florida insurance trust that provides property insurance and other products to cities around the state has issued a $20 million private placement catastrophe bond to help pay claims due to hurricanes. Towers Watson Capital Markets, a wholly-owned subsidiary of Towers Watson, said that the bond, Sunshine Re 2013-1, was issued on behalf of the Orlando, Fla.-based Florida Municipal Insurance Trust.
FMIT is the insurance arm of the Florida League of Cities, which includes 400 cities, towns and villages around the state. In addition to property insurance, FMIT offers FLC members’ workers’ compensation, general liability, auto coverage and other insurance coverage.
FMIT Director of Insurance and Financial Services Jennie Garner said the trust has $135 million in gross premiums and covers $9 million in property. In addition to the catastrophe bond, Garner said the trust also has private reinsurance and does not use coverage provided by the Florida Hurricane Catastrophe.
Garner said that although the $20 million bond represents a small portion of FMIT’s overall catastrophe coverage it is important when it comes to financing hurricanes.
“We believe adding the capital markets to our structure is a proactive step to ensure the availability of capacity,” said Garner. “The cat bond also offers portfolio diversification, pricing efficiencies and establishes a relationship with the capital markets.”
FMIT’s decision to issue a private-placement cat fund is just the latest in the trend of smaller insurers entering into the capital markets. Towers Watson Senior Vice President Mike Popkin said the FMIT deal is the fourth his financial consulting firm has executed. In January, TWCM placed a $61.2 million catastrophic bond for the Cincinnati Insurance Companies.
“We continue to see increased support from insurance-linked securities investors for our private placement approach that brings new cedants and diversifying perils to the market,” said Popkin.