Florida’s Citizens puts reinsurance to $5.4bn at ‘significant’ price hike

Florida's state insurer of last resort, Citizens, topped up its reinsurance programme to $5.38 billion on “significantly higher” risk adjusted pricing, up approximately 25%, company officials said of the state of play following mid-year renewals.

“Citizens was able to place a cost efficient risk transfer programme of approximately $5.380 billion,” documents prepared for a pending board of governors meeting indicated. The sum includes $4.23 billion of new placement and $1.15 billion of existing multi-year coverage; at a cost of approximately $650 million.

The total programme is up notably from the $2.51 billion in coverage purchased the year prior, when the sudden arrival of steep market hardening had shut down Citizens’ plans to take as much as $4.70 billion. Citizens client counts and exposure have since grown notably on a string of insolvencies on the market.

The risk-adjusted price increase for coverage placed in 2023 for the combined coastal and personal lines accounts came to approximately 25%, officials wrote ahead of the pending board meeting.

Rate on line was said to have run “significantly higher” than in the prior year, with gross rate on line up to 12.69% from 8.96% in the prior year period. Net rate on line of 12.03% was up from 8.45% for 2022.

The coastal account, where Citizen’s transferred around $2.46 billion to reinsurers and markets in 2023, was said to have seen only “moderate growth,” capping the risk-adjusted price increase at just below 21% and rendering a gross rate on line of 11.2%.

Five layers of eight traditional reinsurance facilities, a mix of occurrence and aggregate, run above the $1.52 billion base surplus. Those programmes start concurrently with the Florida Hurricane Catastrophe Fund (FHCF), taking 90% of $2.25 billion above $1.05 billion. Four ILS facilities are in place above the FHCF cover, starting at $3.4 billion.

Citizens’ personal lines account saw the more “significant” growth alongside the greater surplus erosion from recent storms and rising litigation, authors warned. That put the risk-adjusted price increase for the line up to 28.6% on coverage placed in 2023. The measure for surplus at risk is also at 100%, flat from the prior year. For 2023, surplus could be depleted on a mere 1-in-4 year event.

For the personal lines account, Citizens bought three traditional facilities, the first concurrent with FHCF which takes 90% of $3.94 billion in excess of $1.84 billion. A layer of ILS takes slices of the next half billion, before a broad array of traditional and ILS programmes takes slices of the next $3 billion.

Citizens had entered the mid-year renewals hoping to buy a total of $5.644 billion of coverage, with a cost not to exceed $675 million, including $500 million in coverage across all three Citizens’ accounts through a new special purpose vehicle, Lightning Re, approved by the Citizens board in March.

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