Cat fund denied aid from U.S. Treasury

State officials have sustained a setback in efforts to shore up the state's Hurricane Catastrophe Fund, which is intended to back homeowners insurance companies in case of a major storm.

An aide to Sen. Bill Nelson confirmed Wednesday that U.S. Treasury officials have said they won't issue a line of credit backing up the Cat fund.

Dan McLaughlin, Nelson's deputy chief of staff, said that's not the end of the line for possible federal help with the Cat fund.

"It was one avenue being explored - it's not good news, but it's not the end of the effort either," McLaughlin said.

McLaughlin said other options include asking the Treasury for a federal guarantee of private loans, or asking the Federal Reserve for a line of credit or loan guarantee.

And, he noted, Nelson and other Florida Congress members still hope to establish a national catastrophe fund, which would back state funds including Florida's.

McLaughlin said Assistant Treasury Secretary Alan Krueger told state officials in a phone call two weeks ago the department doesn't have the authority to issue a line of credit.

By state law, the Cat fund must be able to cover up to $29 billion in potential damages, in the case of a storm so bad it exceeds private insurance companies' ability to pay claims.

Right now, state officials say, the fund could only cover about $11 billion.

The Cat fund backs private companies by selling them "reinsurance" - in essence, insurance policies for insurance companies.

If the Cat fund can't be shored up, it could leave some companies unable to back policies without big rate increases.

Next week, state officials are expected to report to the governor and Cabinet on alternatives for the fund. Last year, the state paid $224 million to the firm of billionaire investor Warren Buffett in return for a promise that Buffett would lend the state $4 billion if needed.