Florida’s Citizens can’t stem the policy inflows; 1.5m mark in sight

Florida's state insurer of last resort Citizens won't stem the inflow of new policies in 2023 and may wait several years for recent reforms to fully shift market direction in the stressed southern state, top officials admitted during a board of governors meeting Wednesday (March 29).

“By December we expect to be over 1.5 million policies,” Citizens top officer Tim Cerio told the board of governors. Total insured values across all accounts could hit $675 billion.

That’s a steep climb from the 1.194 million noted end-February, up over 50% year on year and a record high dating back to points in Q4 2013, fuelled by more than a year of Florida declaring insolvencies and insurers declaring retreats. Policy growth has been accelerating in early 2023 after having shown signs of stabilisation in Q4 2022.

Ceries plays down the relative scale of the growth, noting that given Florida population growth, the group's current state-wide market share near 14% is considerably lower than the ca. 24% last time the individual policy count was similarly high.

And the current portfolio looks eminently disposable, should insurers take heart from recent reforms and return to greater activity in the state. Ceries likes the profile by home age and the mix of geographic location, not overly focused on cat-prone coastal regions.

“We have a good number of policies that should be attractive to take-out companies,” he told the board.

But the run up in policies in 2022 came at an enormous cost.

Citizens ended with a net loss of $2.24 billion as Hurricane Ian hit just as policy counts surged on a string of carrier failures, pushing the direct loss ratio to over 160%, financial information presented to the board indicated.

Consolidated direct written premium of $3.19 billion was up 76% from the prior year on an 81% renewals rate and a 60% increase in new business.

A nearly 20% increase in reinsurance cessions plus a reheating of depopulation left the group with net earned premiums of $1.90 billion, up 88% year on year.

Increased reinsurance cession came as Citizens leaned heavily on the state vehicle Florida Hurricane Catastrophe Fund, to which cessions increased 62%, while cessions to private reinsurers slipped 14%.

A lot of the build-up in policy counts came just ahead of the impact of Hurricane Ian. By year-end, approximately 60,000 total claims have been reported for the full-year, with an ultimate projected claim count of approximately 72,000.

Citizens ended with consolidated ultimate direct losses and LAE for the year at $3.60 billion. Of this, $1,03 billion is recoverable under reinsurance contracts, rendering a net financial hit of $2.57 billion.

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