Florida’s Citizens pads ILS arsenal for leveraged power, up to $500m due

Florida’s insurer of last resort, Citizens Property Insurance Corporation, approved plans for issuance of $400 to $500 million in new cat bonds for three-year excess of loss protection on an annual aggregate basis.

The issue will come from a new vehicle, Lightning Re, ostensibly a tip of the hat to the group's first-ever use of an industry-loss as a trigger.

The programme would attach from $51.5 billion and exhaust at $66 billion of total Florida personal and commercial insured residential losses, based on Verisk's PCS cat loss index for insured losses in Florida from Florida named storms, according to terms of motion approved by the board of governors of Citizens.

Citizens is working from initial price guidance equal to investment yield plus 11.0% - 11.5%.

The transaction is part one of what Citizens calls a two-part reinsurance placement strategy. The second should include the traditional placement and the indemnity trigger capital markets placement, if any, which should come up for board of governors approval in early May.

The move to utilise an industry loss trigger comes as Citizen’s seeks to find a structure that would offer cover across its existing account structures. Recently approved legislation will allow Citizen's to combine its three accounts (coastal account, personal lines account and commercial lines account) into a single account for greater leverage of the combined surplus. But that legislation came very late in 2022 and Citizens currently intends to make this transition no earlier than January 2024.

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