As the Florida Hurricane Catastrophe Fund prepares to return to the municipal bond market for the first time in nearly three years, the agency's chief plans to retire.
Jack Nicholson, the FHCF's chief operating officer since 1994, said the agency is preparing to issue $1.2 billion of taxable bonds. It will be his last financing.
The upcoming deal will provide liquidity for the state-run, nonprofit reinsurer referred to as the Cat Fund.
Fitch Ratings has assigned its AA rating to the bonds, and said the Florida State Board of Administration Finance Corp. expects to sell the issue by negotiation the week of Feb. 1.
Moody's Investors Service currently rates the Cat Fund's bonds Aa3, and Standard & Poor's assigns an AA-minus rating. Neither has released ratings for the upcoming transaction.
The offering was approved in April 2015 by the SBA Finance Corp., whose board members are Gov. Rick Scott, Attorney General Pam Bondi, Chief Financial Officer Jeff Atwater, Division of Bond Finance Director Ben Watkins, and Nicholson as president.
Nicholson plans to retire in late February.
On Thursday, the finance corporation board appointed Lamar Taylor to succeed Nicholson on the board. Taylor, an attorney and certified public accountant, is deputy executive director of the State Board of Administration.
At the Cat Fund, Anne Bert will be acting COO after Nicholson's departure. She is the fund's director of operations.
The state will hire an outside consultant to conduct a national search for a permanent director.
Nicholson has been the Cat Fund's only COO since its inception in November 1993 during a special legislative session.
Florida lawmakers created the fund to stabilize the state's property insurance market after Hurricane Andrew in 1992, which forced some private insurers out of business and other to leave the state because of the risk.
Over the past 21 years, the fund has paid more than $9.7 billion in reimbursements to insurers.
"I have a lot of pride in what the FHCF staff has accomplished as a team," he told The Bond Buyer. "I have provided the leadership and I've always focused on our mission."
In the last decade Florida has been hurricane-free, leaving the catastrophe fund with a projected $13.8 billion in cash resources for the 2016-2017 contract year.
It will also have more than $16.5 billion of liquidity after the upcoming bond sale.
"This will create the strongest financial position the FHCF has been in since its inception," Nicholson said. "I am pleased with where the FHCF is today since we are in a near fully liquid position."
The agency's liquidity position is important because it guarantees that companies can count on timely reimbursements for losses, he said.
The fund will provide up to $17 billion in coverage during the 2016-2017 contract year to the private market and Citizens Property Insurance Corp., the state-run, nonprofit insurer of last resort.
Nicholson said volatility is the nature of the hurricane peril, and it requires a clear understanding and recognition of risk, and how to manage it.
"Everything I have done since the inception of the FHCF was done, and is being done, to strengthen the FHCF's capabilities to accomplish its mission and to deal with any potential threats to that mission," he said. "It has been a challenge to explain the nature of the FHCF's risk, and it has been a challenge to adequately manage this risk."
Part of the agency's strategy has been recognizing the value of taking advantage of opportunities in the financial and the reinsurance markets, Nicholson said.
"The FHCF has experienced a lot over the past 21 years, but our focus on our mission has been unwavering," he said.
Nicholson said he does not have any definitive plans after retiring other than to work on his home. After some free time, he said he may re-evaluate whether to resume working or retire permanently.
