Plus, Citizens’ ongoing depopulation
The Florida Hurricane Catastrophe Fund is borrowing billions in preparation for the next big storm, the reinsurance industry says a federal cat fund backstop is unnecessary coming off a profitable year, plus the latest on Citizens Property Insurance takeouts. It’s all in this week’s Property Insurance News.
Cat Fund Borrowing: The Florida Cat Fund has announced it’s going to issue taxable revenue bonds of up to $3.8 billion dollars and use a minimum of $1.5 billion of that borrowed money to replenish debt from 2020 coming due next year. The Cat Fund provides low-cost reinsurance to Florida property insurance companies to help cover large catastrophic losses from storms. There will be no assessment on member insurance companies as part of this bond deal. Cat Fund COO Gina Wilson said in a statement that the deal will provide “additional capital at an established interest rate and the ability to access funds quickly in the event of a significant storm event.”
Its latest report shows the Cat Fund’s net position decreased by $8.2 billion (or 75%) for the fiscal year ended June 30, 2023, primarily from outstanding Hurricane Ian losses. Since Ian, the fund has issued $1.9 billion in reimbursements to insurance companies and expects to pay out another $8.1 billion by 2028. The fund is also still making payments related to 2017’s Hurricane Irma and 2018’s Hurricane Michael.
© Can Stock Photo / radiantskies
Federal Reinsurance Backstop: In our January 15 newsletter story Federal Reinsurance Fund Proposed, we shared details about Rep. Adam Schiff’s plan to establish a federal catastrophe property loss reinsurance program for insurance companies. The “INSURE Act” would also end federal flood insurance. No thank you, is the reply now from the Reinsurance Association of America.
“A federal (re)insurance program is not needed; it does not address the root causes of insurance premium increases in certain parts of the country and would only increase risk and resulting premiums by encouraging development in high-risk areas,” RAA President Lee Covington told Insurance Business.
Fitch Ratings reports reinsurance capital grew 11% in 2023 to about $535 billion, partially offsetting losses from 2022, with new cat bond notes setting a record high. More in Reinsurance News.
Citizens Depopulation: Citizens President & CEO Tim Cerio appeared last Thursday before the Florida House Insurance & Banking Subcommittee with an update on the state’s insurer of last resort. While its likely to remain the largest property insurance company in Florida by policy count through 2024, Cerio said Citizens is making continual progress in depopulation – shedding policies to the private market. He said 338,000 policies are projected to move out of Citizens this year, up from the 275,000 or so in 2023.
Of the seven companies taking part in this month’s takeout of Citizens policies, Cerio projects 76,000 policies of the 200,000 authorized will actually leave Citizens, due to opt-outs by policyholders. Citizens’ latest policy count is 1.23 million, down from its recent height of 1.41 million in fall 2023.
LMA Newsletter of 1-29-24
