Florida’s Citizens Property Insurance Board Ends 1-in-100 Assessment Risk with Approval of 2015 Reinsurance Package

Above:  Colodny Fass’ Donovan Brown Notes Potential Citizens Assessment Lowered By Risk Transfer Program Approved Today

In a brief meeting held this morning, April 30, 2015, Florida’s Citizens Property Insurance Corporation’s (“Citizens”) Board of Governors (“Board”) approved a multi-layered 2015 Hurricane Season risk transfer program for Citizens’ Coastal Account consisting of mandatory Florida Hurricane Catastrophe Fund (“FHCF”) coverage, traditional reinsurance to cover a 1-in-100 year probable maximum loss, and a fully collateralized reinsurance contract.

The program was described as completely eliminating the potential assessment risk on Florida policyholders in the event of a 1-in-100 year storm.

Layer 1 of the traditional risk program would work in tandem with the mandatory coverage provided by the FHCF to include:

• The 10 percent of losses not covered by the FHCF (note that the FHCF reimburses 90 percent of covered losses)
• Coverage of losses in excess of the FHCF limit

Layers 2 and 3 of this program would augment the 2014 Everglades Re Capital Markets Risk Transfer layer and the 2014 Multi-Year Traditional Layer and would provide annual aggregate loss coverage, protecting Citizens against multiple storms in a single season.

Layer 2 may also provide coverage for two or three seasons.  Layer 4 would provide coverage for commercial non-residential losses not covered by other layers of the program and for which Citizens has no FHCF coverage.

The 2015 cost to Citizens for the traditional risk transfer program, together with the capital markets risk transfer program will not exceed $325 million.

Insofar as the capital markets portion, the Board approved a fully collateralized reinsurance contract with Everglades Re II Ltd. to transfer $250 million of aggregate risk in the Coastal Account for the 2015 through 2017 hurricane seasons. This contract is in addition to the 2013 and 2014 contracts with Everglades Re Ltd.  There is a reset provision similar to the 2014 Everglades Re Ltd. transaction that allows for adjustments to coverage based upon changes to Citizens’ underlying book of business.

The 2015 package represents an increase of $636.5 million from the $3.269 billion in reinsurance protections secured for the 2014 Hurricane Season.  The 2015 package includes an additional $300 million in capital market coverage that can be tapped to pay losses following a named storm.

Today’s Board vote also allows Citizens to eliminate potential assessments that, in 2011, totaled $11.6 billion.

Details of the 2015 risk transfer package are available by clicking here.

Also at today’s meeting, the Board also approved an emergency purchase of credit monitoring services for approximately 20,000 policyholders affected by data entry and data conversion errors that resulted in Declaration pages being mailed to incorrect addresses between December 2014 and March 2015.   It was explained that, although the circumstances of this incident do not meet the definition of a breach of security under Florida law, Citizens believes it is prudent to provide notice to the affected policyholders along with offering them one year of credit monitoring services at no cost.

To view the complete meeting materials, click here.

 

 

Should you have any questions or comments, please contact G. Donovan Brown at Colodny Fass (+1 850 545 8864 or DBrown@ColodnyFass.com).

 

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