Citizens gives approval to $5.5 billion reinsurance strategy

Citizens gives approval to $5.5 billion reinsurance strategy | Insurance Business Asia

Reinsurance

Citizens gives approval to $5.5 billion reinsurance strategy

Plan includes several layers for losses across different segments

Reinsurance

By
Kenneth Araullo

Citizens Property Insurance Corporation has unveiled its $5.5 billion reinsurance strategy for 2024, designed to manage the increasing property exposure in Florida and adapt to evolving reinsurance market dynamics.

Florida’s property exposure is anticipated to climb to $3.6 trillion in 2024, marking a 9.3% increase from $3.3 trillion in 2023. The growth is attributed to factors such as population expansion, new construction, and rising property values.

As per a report, Citizens reported a 31% increase in gross exposure in 2023 and projects additional 7% growth for 2024.

The 2024 reinsurance plan for Florida’s state-backed insurer of last resort includes a $630 million “sliver layer” providing annual per occurrence coverage for personal, residential, and commercial residential losses. This coverage is designed to function in conjunction with the mandatory coverage offered by the Florida Hurricane Catastrophe Fund.

Positioned above the sliver layer and the Catastrophe Fund, Layer One is structured to deliver $4.9 billion in coverage for both personal and commercial residential losses. The layer’s strategy features a $500 million renewal risk transfer via Lightning Re, a multi-year note that provides aggregate coverage.

It also encompasses approximately $4.4 billion in occurrence and annual aggregate coverage sourced from both traditional and capital markets.

Recent shifts in the reinsurance market have seen investors reallocating capital towards alternative investments like private credit, attracted by potentially higher returns. This reallocation, along with heightened demand for risk transfer from other states including Texas, Louisiana, and California, has led to tightened capacity within the reinsurance market.

Market pricing on a risk-adjusted basis for 2024 is forecast to fluctuate between -5% and +5%, holding steady with the rates observed in 2023.

Despite these challenges, the rising exposure and escalating replacement costs in Florida have made extensive reinsurance coverage essential for Citizens.

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