Florida’s Citizens shapes $5.5bn 2024 reinsurance buy; Lightning Re is back
Florida's insurer of last resort Citizens will bring Lightning Re back to market for its 2024 reinsurance programme as part of the $4.9 billion in reinsurance it needs above the FHCF programme or the roughly $5.5 billion it needs overall.
To get to its 1:100 PML threshold, bumped to $17.29 billion including LAE since the last estimate, Citizens would burn all of its surplus and still have to enact $550 million in policyholder charges, an increase from the prior estimate nearer $400 million. Unlike 2023, Citizen's won't have to budget an emergency surcharge to hit the 1:100 level, documents presented ahead of pending committee and board meetings indicate.
Citizens estimates it needs $630 million in reinsurance in the layer running from the $3.51 billion retention to $9.81 billion that is dominated by the state's mandatory cat reinsurance programme FHCF. Coverage from FHCF is now estimated at $5.67 billion, up slightly from the $5.60 billion estimate made for the December board meetings.
Above the FHCF, Citizen's is seeking $4.9 billion of coverage for personal residential and commercial residential losses from the capital and traditional reinsurance markets. That sum will chiefly include $4.4 billion of occurrence and annual aggregate coverage from both traditional and capital market programmes.
Citizens will also run a renewal placement of $500 million on capital markets via Lightning Re, through which Citizens has a multi-year industry loss index trigger XoL catastrophe bond introduced in 2023.
Citizens tentatively puts the Lightning Re vehicle just above the FHCF layer, but warns for the second year of the multi-year notes that “actual attachment and exhaustion points could differ significantly from estimates.”
For its non-residential commercial exposures, not covered by FHCF, Citizen's plots no reinsurance coverage at all, instead setting aside $724 million in surplus to get to a 1:96-year event then a fractional $17 million in policyholder charges to manage the final gap to the 1:100.
It's all talk until bids come in, staff reminded in its preparatory notes to a committee meeting slated for April 9. Next steps are work with the firm's traditional and capital markets teams, as well as its financial advisor, “to evaluate available options relating to the structure, terms, pricing, and other relevant matters with regards to the 2024 risk transfer programme.”
The 2024 reinsurance programme is the firm's first under new rules allowing a joint programme across its three previously separate accounts: personal lines, commercial lines and coastal, a move designed to enhance claims paying power.
The firm had given its first rough outline of its 2024 reinsurance needs, with the $5.5 billion headline, back at a board meeting in December. The 1:100 PML was raised fractionally from $17.11 billion to 17.29 billion.
Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
