With mid-year reinsurance renewals done, Ernie Garateix, CEO of Heritage Insurance Holdings, said recently that the new Citrus Re catastrophe bond his company has sponsored will be complementary to its renewed program.
As we’ve been reporting over the last few weeks, Heritage Insurance had been in the catastrophe bond market with a Citrus Re Ltd. (Series 2023-1) named storm cat bond deal.
The insurer successfully secured an upsizing of the new cat bond, to provide $235 million of named storm reinsurance, while both tranches of notes being issued have been priced at the low-ends of initial spread guidance.
The cat bond issuance settled recently, coming on-risk from June, covering Heritage for three Atlantic hurricane seasons.
Speaking during his firm’s first-quarter 2023 earnings call recently, CEO Garateix explained the status of its reinsurance renewal activities.
First, he highlighted the benefit of having deferred use of Florida’s RAP layer of reinsurance until this year.
“We are working to finalise our 2023 catastrophe reinsurance program, and we’ll announce it when it is completed.
“Last year, we deferred the Florida Reinsurance to Assist Policyholders program, also known as RAP, because our program was already fully-placed.
“The RAP layer will provide reinsurance below the FHCF at no cost to the company,” Garateix said.
On the new Citrus Re catastrophe bond, he said, “We anticipate complementing this year’s traditional reinsurance placement with another ILS transaction.”
While the reinsurance program will also experience multi-year benefits thanks to the cat bond program, that help Heritage in managing the costs of its renewal.
The CEO added, “This year’s catastrophe reinsurance program and costs will also include the remaining limit of $100 million from catastrophe bonds issued in 2022 by Citrus Re, which provides multi-year reinsurance protection.”
Finally, he explained that Heritage will look to manage its reinsurance costs, “Given the expected pricing and capacity for catastrophe reinsurance going forward, we will continue to evaluate and adjust our portfolio to manage exposure concentration and, therefore, manage the cost of reinsurance.
“This includes limiting the amount of new business we expect to write and the amount of existing business we may renew while maintaining compliance with individual state regulations.”
Heritage announced the completion of its reinsurance program shortly after these comments were made.