We’ve heard some very interesting news this morning from a contact; Florida’s Citizens Property Insurance, the state backed property insurer of last resort, is said to be bringing its first catastrophe bond to market through an entity called Everglades Re Ltd. We’ve been waiting for a Florida Citizens cat bond to appear since January when we wrote that they were planning to augment their reinsurance cover with up to $250m of alternative risk transfer most likely through a cat bond deal.
Now it seems that they are taking the plunge to diversify their sources of reinsurance using the capital markets for the first time with this Everglades Re cat bond. We can confirm that a Bermuda special purpose insurer named Everglades Re Ltd. was incorporated on the 9th March 2012 and is registered to a building where other cat bond SPV’s have their registered office on the islands.
As we understand it with the limited information available to us, Citizens are seeking to issue a single $200m tranche of notes through Everglades Re Ltd. to provide them with a collateralized source of indemnity cover for some of their coastal account portfolio of risk on a per-occurrence basis.
This move by Florida Citizens to issue a cat bond and tap the capital markets for reinsurance cover will please many who have been highlighting the potential shortfall that Citizens would face after an active hurricane season. $200m of cover won’t be enough to cover the potential shortfall that could be caused if a number of hurricanes hit Florida, but by proving the appetite of the capital markets to take on their risk now Citizens may issue more cat bonds in future.
This makes Florida Citizens the second state insurance provider to issue a cat bond this year, following on from Louisiana Citizens who issued Pelican Re Ltd. recently. It will be interesting to see if any other state insurers try to emulate these deals before the U.S. hurricane season begins.
That’s all we have for the moment. We’ve added Everglades Re Ltd. to our deal directory and we will update you as and when more details on the transaction become available.