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Florida Citizens budgets for 55% exposure growth, much more risk transfer


Citizens Property Insurance Corporation, the property insurer of last resort for the Florida marketplace, expects to grow its policy count by around 46% during 2023, to reach roughly 1.7 million policies in-force by the end of the year.

Florida Citizens logoThis significant continued growth for Florida Citizens would take its exposure far higher in 2023 if it goes unchecked.

The insurer is budgeting for its written premiums to increase almost 60% year-on-year, taking its exposure to a massive $654 billion by the end of 2023, a 55% increase on 2022.

All of which means Florida Citizens will require much more risk transfer, if it is to protect its book and policyholders in the way it has been accustomed to up until the last year.

But market conditions are likely to dictate just how much risk transfer, in the form of reinsurance and catastrophe bonds Citizens can buy in 2023, so projections the insurer has made may not be met, given the costs of protection are likely to be elevated again.

Florida Citizens policy count exceeded 1 million in August 2022 and by the end of last year had reached more than 1.145 million.

While the CEO of Citizens hopes that recently enacted Special Session legislation to reform Florida’s property insurance market has a positive effect, forecasting a chance of more meaningful policy depopulation towards the end of this year, the latest Florida Citizens budget suggests the insurer is planning for the possibility that doesn’t happen until even further into the future.

As recently as 2019, Citizens wrote just $877 million in premium and insured around 447,000 policyholders.

With 2023’s budget projecting an enormous $5.14 billion of premiums written and nearly 1.7 million policyholders by the end of this year, it reflects projected 5-year growth rates in premium and policyholders of 486% and 276%, respectively.

Thanks to the legislative reforms, Florida Citizens is expecting improvements to its 2023 loss and loss adjustment expense ratios, driven in the main by year-over-year reductions in litigation rates.

But the increase in policy count is forecast to drive an increase in overall loss and loss adjustment expense activity, while the effects of prior periods claims inflation, when litigation rates were still higher, is also likely to have an implication for the insurer.

At the moment, while depopulation, so shifting policies back to the private insurance market, is perhaps the best chance for Citizens to meaningfully shrink, the insurer is not forecasting a huge increase it turns out.

In fact, the budget is for a just 1.43% increase in depopulation, in terms of premiums ceded.

In risk transfer though, Florida Citizens is budgeting for a far higher use of reinsurance and catastrophe bonds for 2023.

The budget forecasts a 235% increase in private market risk transfer, with $725 million of ceded premiums targeted for 2023.

That’s up on the projected $216 million of ceded premium under private reinsurance and risk transfer in 2022.

However, market conditions are going to be the driver as to whether Florida Citizens can buy sufficient risk transfer and reinsurance, in whatever forms, to reach the ceded premium budgeted amount in 2023.

Recall that in 2022, Florida Citizens only purchased a far smaller reinsurance tower than it had originally targeted to buy, the main drivers being price and market conditions.

Florida Citizens had originally entered the reinsurance renewal marketplace in 2022 seeking to buy anywhere up to $3.64 billion of new risk transfer and reinsurance, from across the catastrophe bond and traditional reinsurance markets.

When added to in-force multi-year cat bonds and reinsurance, that meant Florida Citizens would have had a roughly $4.7 billion program in place for the 2022 hurricane season.

But as it transpired, the 2022 tower was much smaller at around $1.285 billion of catastrophe bonds and $1.25 billion of private reinsurance.

Perhaps telling, as to how much Citizens would ideally like to build on its private risk transfer, cat bond and reinsurance arrangements for 2023, the insurer is budgeting that a 1:100 year PML event would drive a private risk transfer recovery as high as $5.285 billion across its accounts.

Florida Citizens is going to have to buy a lot more protection this year to get close to that and with price always set to be a factor, it’s going to be interesting to see how much risk transfer the insurer actually secures through the coming months before the next hurricane season begins.

We are delighted that Florida Citizens CFO Jennifer Montero is joining our upcoming ILS NYC 2023 conference, on February 10th in New York, as a speaker. Register here to attend the event.

Read all of our news and analysis on the Florida insurance and reinsurance market.

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