Florida's Hurricane Catastrophe Fund is considering a bond sale as it continues to process claims from 2005's Hurricane Wilma

Amid predictions of an active hurricane season this year, Citizens Property Insurance Corp. is bulking up its reserves with a $2.4 billion bond offering.

Last week's "pre-sale," which closes April 6, was "very successful," Chief Financial Officer Sharon Binnun told Sunshine State News on Monday. "We met our liquidity goal for the year."

Thanks to a lack of major hurricanes in the past years, the state's largest property insurer, which has 1 million customers, has built up a surplus of some $14 billion.

"We have to plan as if storms are coming every year," Binnun said. "We're feeling optimistic about our claims-paying resources."

The bond sale includes $2.05 billion in fixed-rate, tax-exempt bonds underwritten by JPMorgan Chase. Another $350 million in floating-rate, tax-exempt bonds are underwritten by Goldman Sachs. Raymond James is handling the sale.

The firms were selected through a "competitive solicitation process" last October, Binnun said. Contracts generally run for two years.

Tax-exempt issues reached a two-month high last week as states and municipalities took advantage of lower yields and higher demand fueled in part by sales of taxable, federally subsidized Build America Bonds.

The Citizens bonds offer yields from 2.83 percent for three-year debt to 4.45 percent for 2017 maturities. Moody's Investors Services rated the fixed bonds A2 (sixth highest of 10 investment grades), and Standard & Poor's issued an A+ rating (fifth highest) with a negative outlook.

Sharon Binnun

Though Citizens is a state-run entity, Binnun said S&P's negative outlook was a function of Florida's overall economic outlook, not Citizens.

The Florida Hurricane Catastrophe Fund, meanwhile, is considering a bond sale as it continues to process claims from 2005's Hurricane Wilma. The Cat Fund has an $8 billion surplus, but it is legally liable for claims made five or more years after a hurricane.

The State Board of Administration -- whose trustees are Gov. Charlie Crist, Chief Financial Officer Alex Sink and Attorney General Bill McCollum -- is scheduled to vote on a staff recommendation April 13 to issue $710 million in new bonds.

The action also includes a 0.3 percentage-point increase and extension to the state's assessment on all property and casualty insurance to 1.3 percent.

If the bond sale is approved by SBA trustees, it would bring the Cat Fund's recent bond offerings to $2.69 billion.

Lead underwriters, selected in 2008 through a bid process, include Citibank, JP Morgan Chase, Goldman Sachs and Barclays (previously Lehman Brothers).

In 2008, the Cat Fund and financier Warren Buffett worked out a deal in which his Berkshire Hathaway Inc. would purchase up to $4 billion in state debt if Florida incurred a loss of $16 billion or more that year. The state paid Buffett $224 million to secure the deal, and Buffett never had to shell out a dime in that quiescent storm season.

Jack Nicholson, chief operating officer of the Cat Fund, said stabilization of the bond markets and relatively quiet weather patterns have obviated the need for such arrangements.

Counting all resources available, Nicholson said he expects the Cat Fund will have $20 billion in financial capacity by May.

While state officials say they are confident that Citizens and the Cat Fund are armored for future storm claims, the Competitive Enterprise Institute says Florida taxpayers are in peril.