Florida’s state-backed property insurer announced that it has reduced the size of any possible emergency assessments on policyholders due to its depopulation efforts and by transferring part of its risk to private capital markets.
Citizens Property Insurance Corp. said that the reduction in emergency assessments could be as great as $3 billion or 42 percent for the 2013 hurricane season.
Officials said the reduction is due in part to last year’s depopulation efforts, under which the insurer says private insurers assumed 277,000 policies, lowering Citizens’ exposure by $80 billion.
Adding to the depopulation numbers is a planned takeout by the Tampa-based Weston Insurance Co., which plans to remove 30,000 wind-only policies from Citizens coastal account.
Citizens said it is also building on its efforts last year to transfer a portion of its exposure to the private capital markets. In 2012, the insurer executed a $750 million market transfer through its own self-created reinsurer, Everglades Re.
This year, Citizens plans to transfer an additional $250 million to the capital markets. Taking into account reinsurance and other resources, the insurer plans to have moved $1.75 billion in exposure off its books.
“Transferring risk through the use of catastrophic reinsurance is an effective means to reduce the likelihood and the amount of assessments that must be paid after a storm,” said Citizens Chief Financial Officer Sharon Binnun in a statement.
The depopulation of policies and risk transfer combined will reduce the policyholder assessments needed to cover a one-in-one h10 year storm from $7.28 billion in 2012 to $4.22 million this year, according to officials.
Emergency assessments can be levied on most lines of property/casualty insurance except workers’ compensation and medical malpractice. The assessments can be levied following a major catastrophe if Citizens exhausts its surplus, reinsurance and other policyholder surcharges and still has outstanding claims.
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