The Board of Florida’s Citizens Property Insurance Corporation has approved the 2016 risk transfer and reinsurance program, including the shift of certain traditional layers to a per-occurrence, single-year structure and the acquisition of an additional contract for commercial reinsurance.
As reported earlier today on Artemis, Florida Citizens was seeking a strategic change to its reinsurance program for 2016, wanting to renegotiate two multi-year aggregate reinsurance contracts and shift the protection to per-occurrence coverage for the 2016 hurricane season.
The Board of Citizens has just approved the approach in a conference call, giving the Florida Citizens staff responsible the approval to secure the new layer of single-year, per-occurrence reinsurance that is designed to work alongside and in tandem with the insurers Florida Hurricane Catastrophe Fund (FHCF) protection.
The Board also gave approval for the staff to go ahead with procurement for another layer of reinsurance to provide $221m of commercial non-residential risk (CNR) protection.
The cost for the new one-year layer of reinsurance, the commercial reinsurance coverage and the 2016 costs associated with the still in-force $1.8 billion of catastrophe bonds, were all expected to come to a maximum of $204m.
But during the conference call Citizens CFO Jennifer Montero said that the reinsurance protection would likely cost around 10% less than the budgeted $204m, likely reflecting continued attractive pricing and price declines in the Florida property catastrophe reinsurance market, as well as reinsurer and collateralised markets desire to support Citizens risk transfer needs.
So as Citizens downsizes its reinsurance requirements, as it depopulates and becomes a smaller risk bearing entity, it still has the support of the reinsurance and collateralised markets enabling it to achieve under-budget costs for risk transfer.
With the 2016 risk transfer program in place Floridan’s are better protected against potential assessments that could occur after a major hurricane strikes, demonstrating the valuable disaster risk finance that reinsurance and capital markets risk transfer arrangements provide.
Read more from earlier: Florida Citizens shifts reinsurance focus to per-occurrence in 2016.