Citizens Property Insurance Corp., the state-backed insurer of last resort, Wednesday said it will seek approximately $200 million in traditional reinsurance coverage for the 2019 hurricane season.
That’s “to protect surplus exposed to storm risk in areas located away from the coast. This follows mounting losses from hurricanes, non-weather water-loss claims, litigation and assignment of benefits abuse,” the company said in a statement.
Reinsurance is a kind of insurance for insurers.
For the first time since 2005, Citizens will purchase traditional reinsurance for its Personal Lines Account (PLA), comprised of 301,000 residential policies, most of which are not located along the coast.
The reinsurance coverage will reduce Citizens’ exposure to 52 percent from 62 percent in the event of a major storm.
“After significant losses … from Hurricanes Irma and Michael, along with non-weather losses and assignment of benefits, the Personal Lines Account surplus has decreased significantly and is now exposing much more of its surplus for a (once in 100 years) storm,” Jennifer Montero, Citizens Chief Financial Officer, told its Board of Governors on Wednesday.
For 2018, the PLA experienced a net loss of $135.9 million.
Traditional reinsurance coverage for the Personal Lines Account will be part of a $1.6 billion risk transfer package being assembled for the 2019 hurricane season, which begins June 1, the company said.
Citizens plans to have $1.4 billion in coverage established for the Coastal Account. This includes $880 million in traditional reinsurance and catastrophe bonds purchased in 2017 and 2018, which remain in place for the 2019 season.