While Florida’s Citizens Property Insurance Corporation could buy as much as $3.4 billion of new reinsurance and risk transfer in 2022, including catastrophe bonds, the main focus is on delivering value, as the not-for-profit property insurer targets cost savings.
After a Board meeting yesterday, Florida Citizens highlighted the need to reduce costs.
The Board of Governors said Citizens staff need to work to strengthen the financial position of Florida’s insurer of last resort.
Florida Citizens faces challenges due to a rapidly increasing policy count, litigation and a continued weak private insurance market.
While the company has $6.5 billion in reserves, Citizens Chairman Carlos Beruff said the insurer has to find ways to cut costs and/or raise revenues, in order to stem underwriting losses as the Florida market continues to experience challenges.
“We just want to be solvent so when a CAT event comes, we are not sticking Floridians with Citizens’ assessments across the state,” Beruff stated. “That is my mission.”
Citizens remains restricted on applying rate increases, with law stating increases cannot exceed 11%, while legislative efforts that might have helped lessen the burden on Citizens failed to gain passage through Florida’s legislature in the last session.
“Until we get some legislative relief…we are stuck chasing our tails,” explained Citizens’ Board member Scott Thomas.
Costs of risk transfer are set to rise for Florida Citizens as well, with reinsurance rates hardening and catastrophe bond coverage also likely to cost a little more than in prior years.
As we explained recently, Florida Citizens will pursue securing anything up to $3.4 billion of reinsurance and catastrophe bond limit for the 2022 wind season.
The Board has tasked Citizens staff with bringing options to it at a meeting in May.
Citizens is already out in the market and we hear a new catastrophe bond is likely to be launched to investors in the coming weeks, with the only question being its size.
The insurer recognises the need to continue buying risk transfer in order to reduce the risk of Citizens policyholder surcharges and assessments on all property insurance policyholders if major hurricane or storm losses hit Florida this year.
Citizens’ Chief Financial Officer Jennifer Montero commented, “We’re going to come back to the Board with the best deal we can get.”
Florida Citizens exposure continues to grow, with 801,341 as of this week, but CEO Barry Gilway forecast yesterday that this will reach 1 million policies in 2022.
Gilway highlighted the continued challenges facing the Florida property insurance market, implying things are getting worse, rather than better.
It’s set to be a difficult reinsurance renewal for Citizens, with costs almost certain to rise. The cat bond market may be able to provide some solace though, with capital costs seemingly still very competitive there and this could turn Citizens back towards larger cat bond issues, if the market pricing is particularly conducive.