Heritage closes Citrus Re 2015-1
Heritage Property & Casualty Insurance has closed Citrus Re 2015-1, which offers three classes of notes that total $277.5 million.
This is Heritage’s third catastrophe bond placement, which in total provides $477.5 million in coverage.
The Class B and C notes are the first to replace a portion of the coverage provided by the Florida Hurricane Catastrophe Fund (FHCF).
This effectively reduces Heritage’s participation in the FHCF to 75 percent, a decrease from the typical 90 percent level used by most of the Florida domestic insurers.
According to Heritage, Citrus Re provide three years of coverage at an average rate below what is charged by the FHCF.
The catastrophe bond features an indemnity trigger on a per occurrence basis, and provides fully collateralised coverage for personal residential and commercial residential policies.
It added that it also placed the Series A notes well within guidance which total $150 million in coverage for three years.
"We are pleased with the pricing for Citrus Re 2015-1 and particularly with the cost savings achieved by using the Class B and Class C notes to replace a portion of the FHCF," said Bruce Lucas, chairman and chief executive officer (CEO).
"We were concerned that the FHCF would pass on a large rate increase resulting from its purchase of private reinsurance and wanted to protect our policyholders. The pricing generated a saving for our reinsurance programme for the three year period, and the savings were amplified when the FHCF announced on April 14, 2015 that there would be a 7.29 percent rate increase on Floridians to incorporate the cost of its newly approved risk transfer programme.
“We are proud to have had the foresight to once again recognise market trends before they happen, which we believe will result in an estimated $2.5 million in savings over the next three years. We appreciate the support the ILS investor community has provided to Heritage and look forward to continued transactions."
