Florida will pay $224 million to Berkshire Hathaway Inc. for a guarantee that the state can borrow up to $4 billion if necessary to help cover future losses by its emergency hurricane insurance fund. Gov. Charlie Crist and Chief Financial Officer Alex Sink reluctantly voted to approve the deal July 29. The State Board of Administration’s third member, Attorney General Bill McCollum, voted no.

The agreement with Omaha, Nebraska-based Berkshire Hathaway, the conglomerate headed by billionaire investor Warren Buffett, will allow the emergency borrowing by Florida Hurricane Catastrophe Fund, which provides backstop coverage for insurance companies. State officials were worried that without the guarantee, which would kick in if losses exceed $25 billion, the fund might be unable to borrow such large sums due to the tight credit market. Florida Gov. Charlie Crist (R) said he’d like to spend the money on other things such as school teachers, but that the deal would help him sleep better.

Hurricane season began June 1. Colorado State University’s hurricane forecasting team has upped its predictions for the 2008 Atlantic storm season, and now anticipates 15 named storms, eight hurricanes and four intense hurricanes. According to CSU, the odds of a major hurricane making landfall in the United States in 2008 is 69%, compared with a 52% average over the past century.

Florida to Pay $224 million to Berkshire Hathaway (Insurance Journal 7/31/08)

August 5, 2008