Citizens’ $3.565B in Reinsurance Means More Protection for Florida Property Owners

By Jennifer Montero

Every May, right before the beginning of hurricane season, you are likely to hear news about Citizens Property Insurance Corporation returning from the global market with a risk transfer program to protect Citizens’ policyholders and all property insurance consumers in Florida by providing reinsurance coverage to pay losses in the event of a big storm or series of storms.

For 2024, Citizens secured $3.564 billion in coverage from the traditional reinsurance and capital markets, which includes $3.064 billion in new coverage. The total 2024 risk transfer placement is in addition to Citizens’ surplus and the Florida Hurricane Catastrophe Fund to pay claims following a 1-in-83-year storm without having to levy an emergency assessment.

The market is dynamic; therefore, the timing, structure, and pricing will need to be evaluated each year. In a soft market, pricing is low, capacity is high, and the so-called “bells and whistles” are feasible. During a hard market, pricing is high, capacity is limited, and “bare bones” coverage is typically the only coverage available at somewhat reasonable pricing. This year, the market was not as hard as the last few years, but not what would be considered “soft.”?

Citizens’ 2024 risk-adjusted price reflects some improvement in the market despite the appearance of a pricing increase in both the traditional and capital markets. The price for coverage placed in 2024 is approximately 7.9% lower than it would have cost for similar coverage in 2023.

Risk-Transfer Climate Changes; Citizens Does Not

While the risk-transfer climate can change yearly, one thing does not – Citizens' reputation in the market. Over the years, the global market has come to trust Citizens due to its transparency, actuarial expertise, and the lower credit risk it poses based on its business structure. Created by the Florida Legislature as an insurer of last resort in the state, it is a tax-exempt governmental entity that can levy assessments if its surplus is exhausted.

Litigation reforms passed in 2022, along with the recent success of Citizens’ Depopulation Program and the increased interest of private insurers entering the Florida market, have not gone unnoticed. The global risk transfer market is seeing improvements in the Florida property insurance market and is responding positively. This has allowed Citizens to secure reinsurance coverage at rates somewhat below those of private-market companies, which are required to obtain higher amounts of reinsurance coverage than Citizens.

While the Florida Legislature can be credited with the recent legislative reforms, Citizens’ employees are responsible for its reputation in the marketplace, which is the result of a continuous effort by Citizens staff, guided by its leadership team and supported by the Board of Governors.

For example, preparations for the 2024 risk transfer program began in October 2023. If there is an unofficial start to the process for Citizens, it would be the American Property and Casualty Insurance Association annual meeting. Here, reinsurers receive midseason updates for the current hurricane season – which is especially important if there have been any wind losses – and start discussions regarding the upcoming year’s program.

The goal is to complete a risk transfer program before June 1, the official start of the hurricane season. Travel for the marketing trips typically occurs in March and April to multiple locations, including New York, London, Zurich, and Bermuda, to meet with reinsurers and investors. These trips are referred to as the “roadshow.” During these meetings, Citizens provides reinsurers and investors updates on policies-in-force count, exposure, new business, and depopulation – a program to steer policyholders to private insurers. The company also provides information on claims and litigation, premium rates, underwriting rules, insurance to value, legislation, data quality, and current initiatives across the organization, as well as a few other updates.

Preparation for the marketing trips requires involvement across the entire corporation. It is a team effort that reflects the cooperation of many Citizens' employees across the company, ultimately benefiting property insurance customers across the state.

Jennifer is Citizens' Chief Financial Officer