Citizens ‘takeout’ deal could become template
Senior executives at JLT Reinsurance (North America) believe a structure used in a recent deal that helped Citizens Property Insurance Company, Florida’s residual insurance company, transfer 31,000 policies to a new company and reduce its exposure by some $30 billion in the process could lead to similar deals in the future and opportunities for JLT Re as a result.
JLT Re spent 18 months structuring the deal that saw the policies and exposure transferred to Weston Insurance Company, a newly formed Floridian insurer, which will, in turn, pass a significant percentage of the exposure into the reinsurance markets.
Craig Darling, chief executive of JLT Re North America, said that although ‘takeout’ business from Citizens is common, this was the first significant commercial residential and commercial non-residential takeout in Citizens’ 10-year existence. He also noted that the local regular was concerned about allowing a new company to participate in such a scheme but the structure satisfied these concerns.
He believes similar deals could now follow. “We believe that the advisory work, analytics and assembly of strategic capital will be a catalyst for other similar opportunities for start-up companies and/or enhancement of existing balance sheets,” Darling said. “We are committed to grow our property cat platform across North America in years to come.”
While JLT Re acted as the reinsurance broker on the deal, JLT Advisory acted as the strategic capital and analytics advisors and worked with the JLT Analytics practice to support the investors and Weston’s management team.
The deal was also good news for some reinsurers. “Weston will be purchasing a significant amount of quota-share and excess of loss reinsurance this year and future years. The company has secured an AM Best rating which will require more traditional reinsurance risk transfer than many smaller undercapitalized domestic Florida companies,” Darling said.
