Citizens Property Insurance Corporation will seek approximately $200 million in traditional reinsurance coverage for the 2019 hurricane season to protect surplus exposed to storm risk in areas located away from the coast.
In a statement, Citizens said that this followed mounting losses from hurricanes, non-weather water-loss claims, litigation, and assignment of benefits abuse.
For the first time since 2005, Citizens said, it will purchase traditional reinsurance for its personal lines account (“PLA”), which is comprised of 301,000 residential policies, most of which are not located along the coast. The reinsurance coverage will reduce Citizens' PLA surplus exposure from 62 percent to 52 percent in the event of a 1-100 year storm.
“After significant losses in the personal lines account from Hurricanes Irma and Michael, along with non-weather losses and assignment of benefits, the personal lines account surplus has decreased significantly and is now exposing much more of its surplus for a 1-100 year storm,” Jennifer Montero, Citizens' chief financial officer, said.
Since 2015, Citizens has incurred net operating losses in the PLA. Citizens said that along with claims from Hurricanes Irma and Michael, these net operating losses were driven by non-weather-related water claims, assignment of benefits abuse, and increased litigation. For 2018, the PLA experienced a net loss of $135.9 million.
Traditional reinsurance coverage for the PLA will be part of a $1.6 billion risk transfer package being assembled for the 2019 hurricane season, which begins June 1. Citizens plans to have $1.4 billion in coverage established for the coastal account. This includes $880 million in traditional reinsurance and catastrophe bonds purchased in 2017 and 2018, which remain in place for the 2019 season.
Citizens was created by the Florida legislature in August 2002 as a not-for-profit, tax-exempt, government entity. Its mission is to provide insurance protection to Florida policyholders who are entitled to but are unable to find property insurance coverage in the private market.
Learn more: Risk transfer package.
Victoria Spears
Victoria Prussen Spears is senior vice president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. A graduate of Sarah Lawrence College and Brooklyn Law School, Ms. Spears was an attorney at a leading New York City law firm before joining Meyerowitz Communications. She may be contacted at [email protected].