Florida's Hurricane Catastrophe Fund (FHCF) will pay Berkshire Hathaway $224 million now in return for the Warren Buffet-owned company's purchase of $4 billion in state bonds in the event a hurricane causes major damage to the state this year.
Berkshire said it will purchase the tax-exempt bonds if insured losses from hurricanes in 2008 eclipse $25 billion.
The agreement, approved by Florida Gov. Charlie Crist, the state's chief financial officer and attorney general, requires Berkshire to purchase $4 billion of 30-year tax-free bonds with a 6.5 percent coupon, if the state fund incurs total storm-related claims this year greater than $25 billion.
The FHCF was created in November 1993 during a special legislative session after Hurricane Andrew. The purpose of the FHCF is to protect and advance the state's interest in maintaining insurance capacity in Florida by providing reimbursements to insurers for a portion of their catastrophic hurricane losses. The Fund currently provides coverage of around $29 billion.