Citizens Property Insurance Corp.’s Board of Governors approved a $3.9 billion risk transfer package for the 2015 hurricane season that completely eliminates the potential assessment risk on Florida policyholders in the event of a 1-in-100 year storm.
By unanimous vote on April 30, board members approved a package that includes $1.855 billion in traditional reinsurance and $2.05 billion in capital market catastrophe bonds. The combination bolsters Citizens’ surplus and existing risk transfer resources to enable it to pay claims in the event of a “storm of the century” without having to levy assessments on Florida policyholders, the company said in a statement.
The 2015 package represents an increase of $636.5 million from the $3.269 billion in reinsurance protections secured for the 2014 hurricane season. The 2015 package includes an additional $300 million in capital market coverage that can be tapped to pay losses following a named storm.
The vote allows Citizens to eliminate potential assessments that in 2011 totaled $11.6 billion. Coupled with an increasingly robust private market that has allowed Citizens to reduce its policy count and exposure, the additional coverage puts Citizens in the best financial shape since its creation in 2002, Citizens Chairman Chris Gardner said following the vote.
“Eliminating the risk of assessments on Citizens customers and Florida policyholders has been the top priority for Citizens over the past several years and I’m happy to announce that we have reached that goal,” Gardner said. “As the private market continues to strengthen, Citizens gets closer and closer to returning to its traditional role as the state’s residual carrier.”
Along with better pricing, the 2015 risk transfer package increases coverage for multiple events and expands protections for commercial nonresidential policies.
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