Citizens Property Insurance To Purchase Approximately $400 Million in Private Reinsurance, Issue $900 Million in High-Risk Bonds
May 11, 2011
At its meeting today, May 11, 2011, Citizens Property Insurance Corporation Board of Governors (“Board”) authorized the purchase of approximately $400 million in private reinsurance to cover its High-Risk Account (“HRA”) for personal residential and commercial residential lines (“PLA/CLA”) in advance of the 2011 Hurricane Season.
The cost of such coverage was represented to not exceed 21.5 percent rate-on-line, for a total cost not to exceed $125 million, which is the amount included in the 2011 budget previously approved by Citizens Board. The amount of coverage purchased would be a minimum of $300 million, with a cap not to exceed $580 million. It was presented to the Board that the risk transferred would be in a range of $400 to $500 million, given current market conditions.
To evaluate the financial strength of private reinsurers to be included in the program, Citizens will collaborate with Guy Carpenter, one of the contracted reinsurance brokers, together with its financial advisor, Raymond James. Citizens anticipates that it will recoup a portion of the cost of private reinsurance through the ratemaking process in its 2012 rate filing.
Citizens has not purchased private reinsurance since 2006.
Statutory purchase of the Florida Hurricane Catastrophe Fund Mandatory Layer of coverage for $460 million ($180 million for the PLA/CLA and $280 million for the HRA) was approved as well.
The Board later authorized the issuance of up to $900 million of HRA Series 2011 Pre-Event Bonds as part of its ongoing liquidity financing program, also in preparation for the 2011 Hurricane Season and beyond.
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