Reinsurance prices have dropped since Florida’s 2022-2023 litigation reform measures were enacted, but the biggest rate reductions
are mostly for reinsurance above what the Florida Hurricane Catastrophe Fund provides, Citizens Property Insurance Corp. officials said this week.
“Rate reductions are expected to be in the range of approximately 5% for the layers below the Florida Hurricane Catastrophe Fu
d and north of 10% for layers above the Cat Fund,” Citizens’ Chief Financial Officer Jennifer Montero said at a special Board of Governors meeting Wednesday.
That means “it is not currently cost efficient for Citizens to purchase risk transfe
r below the Cat Fund attachment point” ahead of the June 1 renewal date.
With that, the board voted unanimously to take the bold step of avoiding private reinsurance for losses incurred below the Cat Fund’s retenti
on point. The move signifies that in case of a 100-year storm event this year Citiz
ens would have to burn through $2.5 billion of its $4.8 billion surplus first, before making claims with the Cat Fund and private reinsurers.
That could potentially result in a $42 million surcharge on Citizens’ policyholders if a massive hurricane – or two – hits Florida in the
ext six months. At Citizens’ current level of policies in force, about 841,000 as of the end of March, that could amount to an average ass
essment of about $49 per policyholder.
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But Citizens’ leadership, recently adamant about obtaining better reinsurance rates, suggested that plan is less of a risk and is a
better deal than paying for costly private reinsurance.
Citizens’ reinsurance tower, presented at the meeting this week. Click to
enlarge image
“I don’t recall the total amount of claims that were made against the reinsurance that
we had purchased over the years, but the cost of the reinsurance significantly exceeded the amount of claims made against it
,” said Board member Robert Spottswood, a Key West attorney and developer.
Board Chairman Carlos Beruff said he has urged Citizens staff and oth
er board members to walk away from reinsurance if prices don’t seem fair in light of the 2022-2023 reforms that have greatly reduced claims litigation and costs.
“If every governor has that same opinion, it sends a very clear signal to the markets that we’re just not buying unless the price makes sense, and if it doesn’t make sense, we’ll go without buying as this organization has done in prior years,” Beruff said at the meeting.