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Florida Citizens aims to near double new cat bond to $950m in size


Citizens Property Insurance Corporationis set to significantly increase the amount of capital market backed reinsurance it has in-force from catastrophe bonds, with its latest Everglades Re II Ltd. (Series 2021-1 & 2021-2) issuances now targeting between $800 million and $950 million of coverage.

Florida Citizens logoThe not for profit property insurer for the state of Florida, Citizens has been tapping the insurance-linked securities (ILS) market as part of its reinsurance arrangements using catastrophe bonds since 2012.

Details of every Florida Citizens sponsored 144A cat bond can be found here.

In recent years, Everglades Re cat bonds from Florida Citizens have shrunk in the amount of cover they provide alongside its overall reinsurance arrangements, as declining insured values at-risk in its portfolio meant less protection was required.

But over the last year or so, Citizens book of business has dramatically increased again, leading the company to require more reinsurance and once again upsize on its cat bond backed coverage.

As we explained back in March, Florida’s Citizens Property Insurance Corporation is targeting securing at least a $2.6 billion reinsurance and risk transfer program, in readiness for the 2021 hurricane season, with as much as $850 million of new catastrophe bonds likely to be a part of it.

As anticipated, Citizens returned to the catastrophe bond market in late April with a target for a $500 million or greater dual-series issuance, this latest Everglades Re II Ltd. Series 2021-1 and Series 2021-2 deal.

But with catastrophe bond investor demand remaining very strong and market conditions delivering strong execution for sponsors in 2021, there was always a strong chance the deal could upsize.

Sources have now told us that Florida Citizens now aims to secure up to $950 million of fully-collateralized Florida named storms reinsurance protection with this deal, so possibly a near doubling for the issuance.

The transaction will provide Florida Citizens with fully-collateralized reinsurance protection, on an indemnity trigger and annual aggregate basis, against losses from Florida named storms and hurricanes over a three-year term to May 2024, with coverage included for both its Coastal Account and Personal Lines Account books of insurance business.

The Series 2021-1 Class A tranche of Coastal Account notes have an initial expected loss of 1.1% and were $175 million in size at launch. We’re now told the target for this tranche is $300 million to $350 million. These notes were first offered to investors with price guidance of 5.75% to 6.5%, but this has now fallen to the low-end at 5.75%, we’re told.

The Series 2021-1 tranche of Class B notes will also cover the same Coastal Account book, but are a little riskier with an initial expected loss of 1.67%. This tranche was also $175 million at launch, but the target has now been lifted to between $225 million and $275 million. The notes were first offered to cat bond investors with price guidance in a range from 6.75% to 7.5%, but this has now also fallen to the low-end of guidance at 6.75%.

The final originally $150 million Series 2021-2 Class A tranche of notes will cover some of the risks in Citizens Personal Lines Account and have an initial expected loss of 1.03%. The target for this tranche now stands at $275 million to $325 million. These notes were first marketed with coupon price guidance in a range from 5.75% to 6.5%, which has now also fallen to the low-end at 5.75%.

So all three tranches of cat bond notes to be issued by Everglades Re II Ltd. for Citizens are set to increase in size, while pricing looks likely to settle for all three at the bottom-end of guidance.

Representing another strong execution from the global catastrophe bond market, as investor demand helps sponsors to upsized and keenly priced collateralized, multi-year reinsurance protection.

At between $800 million and $950 million this will be one of the biggest catastrophe bond issues on record, although still some way off Florida Citizens own record $1.5bn deal from 2014.

You can read all about Florida Citizens latest catastrophe bond, the Everglades Re II Ltd. (Series 2021-1 & 2021-2) transaction, as well as every other cat bond transaction in our extensive Artemis Deal Directory.

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