Citizens Property Insurance Corp. will transfer $1.42 billion in risk to the reinsurance and capital markets — a move its leadership said would leave it with reserves sufficient to cover a major storm.
The policy, adopted unanimously during a telephone conference call of Citizens’ board of governors, “will allow us to face the upcoming wind season for the fourth consecutive year with no potential assessment risk in a one-in-100-year storm,” chairman Christopher Gardner said.
Notwithstanding $1.8 billion in losses to Hurricane Irma, a “substantial surplus has been accumulated in all accounts to pay for future claims,” according to an executive summary of the plan.
Citizens, Florida’s property insurer of last resort, has been transferring risk during recent years to a variety of third parties, including the Florida Hurricane Catastrophe Fund, traditional reinsurance providers, and the capital markets.
The amount includes $480 million in risk capacity left over from 2017.
“This in turn also provides for additional claims paying resources in the event that multiple hurricanes strike Florida. Citizens’ private reinsurance programs are structured to also provide liquidity to Citizens by allowing Citizens to obtain reinsurance recoveries in advance of the payment of claims after a triggering event,” the document says.
“Over the last six years, Citizens executed a total of $3.1 billion of multi-year, collateralized reinsurance placements in the capital markets with Everglades Re. These placements not only provided an overall reduction in the pricing of reinsurance programs but also enabled Citizens to expand the diversity of reinsurance sources and reach new market participants,” it adds.
State law requires Citizens to pass the hat among its policyholders if it is unable to pay losses arising from covered property.