Florida’s Citizens Property Insurance Corporation has revealed that it expects to claim back $126.4 million from the private reinsurance market to help it pay for claims from hurricane Irma.
Florida Citizens experience with hurricane Irma claims escalation has reflected the market, with loss creep and assignment of benefits (AOB) related issues perhaps a cause for the insurer moving from an expectation of no reinsurance claim, to a $126.4 million claim.
Soon after hurricane Irma struck Florida, Citizens said that it expected that its surplus would largely deal with an estimated $1.23 billion of insured losses for claims from the storm, while it also expected to recover around $193 million from the Florida Hurricane Catastrophe Fund as well.
That was in late September 2017, not long after hurricane Irma hit the state, and the expected claims burden rose as Hurricane Irma losses and loss adjustment expenses (LAE) amounted to roughly $1.8 billion by May this year.
Now it’s clear the loss creep has continued for Florida Citizens, with a report to the Audit Committee from CFO Jennifer Montero yesterday revealing that gross losses and LAE from hurricane Irma were unchanged at $1.81 billion at June 30th 2018.
However, Florida Citizens estimated recoveries from the FHCF now amount to $534.7 million, of which $193.8 million, $6.2 million and $334.7 are within the PLA, CLA and Coastal Account, respectively.
As a result, estimated recoveries from the private reinsurance market, which could include some insurance-linked securities (ILS) funds or collateralised reinsurers, now amount to $126.4 million within the Coastal Account.
This is from total estimated hurricane Irma claims amounting to 70,800 claims, which is a projection as they are likely still being dealt with, or 41,500, 250 and 29,050 in the PLA, CLA and Coastal Account, respectively.
Florida Citizens CFO also said that the figures include a projected litigation rate of roughly 30% across all personal lines claims along with the associated increase in loss and LAE’s that would be expected due to claims inflation.
So Florida Citizens did benefit from its robust reinsurance program in the end, although its catastrophe bond coverage sits so much higher in the tower that it will not be affected.