Citizens Board OKs up to $5.5B reinsurance purchase

The Board of state-run Citizens Property Insurance Corp. approved the purchase of $5.5 billion in reinsurance coverage for the 2024 hurricane season, at a cost of up to $750 million.

If the coverage and the cost both hit those levels, it would be an increase on last year’s purchase of $5.38 billion in coverage for $650 million. The approval of $750 million total doesn’t mean Citizens will spend that much, however. Last year the Board initially approved $725 million before paring it back to $675 million, and staffers tasked with making the purchase only spent $650 million.

Citizens Chief Financial Officer Jennifer Montero explained to the Board that reinsurance rates are only slightly higher than last year, reflecting a stabilizing market in Florida but also one in which inflation and the prospect of interest rates remaining at current levels are significant factors.

“Reinsurance markets are better than last year but have significantly changed since the beginning of the year,” Montero said. “Capacity is constrained as all insurers need more capacity in 2024. This is due to significant increases in exposure replacement costs.”

Two Board members, Chair Carlos Beruff and Charlie Lydecker, bemoaned the requirement under state law to conduct a public hearing over reinsurance purchases, saying it hampers the ability of the company, which is a state-run enterprise, to strategize its approach in the market.

“It’s hard to negotiate or play a poker game when you’re showing people your poker hand,” Beruff said.

Montero assured the Board that she and her staff would not pay above the market rate for reinsurance, however.

“We definitely do not pay above market for the reinsurance; we have walked away before and I think the market knows that,” Montero said. “My team would never go out and pay outrageous pricing just because we have authority for this spend.”

Hurricane season starts June 1 and lasts until November 30.