Citizens to add $750m of traditional reinsurance, doubling budgeted risk transfer
Citizens Property Insurance, the state backed property insurer of last resort in Florida, who recently completed the largest catastrophe bond ever with the $750m Everglades Re Ltd., is planning to double the total amount of private market risk transfer purchased this year to $1.5 billion. Earlier this year we reported that Citizens would seek $750m of risk transfer with up to $250m coming from a cat bond, but now, thanks to the size of Everglades Re Citizens are looking to double their private market protection.As I said in "Excellent Timing: State of Florida Unloads $3/4 Billion of Hurricane Risk":
At a board meeting held yesterday Citizens approved a plan to acquire $750m of traditional reinsurance to add to the $750m of cover from the Everglades Re cat bond. Citizens will begin talking to brokers to attempt to secure a two-year $250m layer of reinsurance cover as well as a one-year $500m layer of reinsurance....MORE
For the last few years the State has been doing their Lady Godiva bit, riding naked in the hurricane insurance biz.But for 2012-13 they dump $750 mil. of risk in the largest ever catastrophe bond and now $750 mil. in reinsurance?
No reinsurance, no Catastrophe bonds. The strategy has been: "Charge underpriced premiums and pray".
And they've been lucky!...
Factor in "Hurricane Watch: State-backed Florida Citizens Property Insurance Corporation Aims to Dump 678,000 Policyholders by 2014" and you have a massive reduction in Citizen's risk profile.
Largest Ever Catastrophe Bond Issuance, $750 Mil. Florida Hurricane Cover, Lists on Bermuda Stock Exchange