Florida Citizens expects uplift in ROL as Board approves $5.5bn in coverage for 2024

At a recently held Board of Governors meeting, Jennifer Montero, Chief Financial Officer (CFO) of Florida’s Citizens Property Insurance Corporation, said that the insurer of last resort is expecting a slightly higher rate on line as the Board approved staff to secure $5.5 billion in reinsurance and risk transfer for 2024.

The Board approved staff to work to secure the $5.5 billion in coverage from the traditional reinsurance and capital markets, and also approved the budget of up to $750 million to secure the coverage ahead of the wind season.

Last year, Citizens secured $4.2 billion of reinsurance coverage and risk transfer at a cost of roughly $650 million.

For the 2023 program, the gross rate-on-line (ROL) was 12.69%, and Montero confirmed today that for the 2024 program, the ROL is expected to be higher at 13%.

So, the Board has approved Citizens to secure the $5.5 billion of coverage, which will be comprised of a per-occurrence sliver layer sized at $630 million, and then a main layer sized at $4.4 billion, which provides coverage from the capital and traditional markets, and also its $500 million Lightning Re (Series 2023-1) catastrophe bond transaction. Within the $4.4 billion of coverage also sits the firm’s latest catastrophe bond, Everglades Re II Ltd. (Series 2024-1), which is set to price soon, currently sized at up to $1.25 billion.

“Market pricing on a risk-adjusted basis is expected to be similar to 2023, ranging from a negative 5% to a positive 5%. However, capacity is constrained as all insurers need more capacity in 2024,” said Montero during today’s meeting. “This is due to see significant increases in exposure replacement costs, as well as the RAP and FORE layers have expired, which translates into additional need for approximately $1 billion of reinsurance coverage from the private market. And of course an increase in the cat fund retention from $9.5 to $9.9 billion.”

Commenting on market conditions more broadly, Montero explained that the reinsurance markets are better than last year but warned that they have significantly changed since the start of 2024.

“There were significant amounts of capital invested in reinsurance markets in the last quarter of 2023, as interest rates were starting to come down with the expectation of Fed rate cuts. However, as inflation continued the Feds changed its stance to higher for longer and now investors are trying to capitalise on higher rates. And, therefore, they’ve been moving some of the capital from reinsurance markets to alternative investments, including private credit where their returns are higher,” she said.

The CFO went on to note that there’s also additional risk transfer needs or demand from Texas, Louisiana, and California, as property markets continue to dislocate nationally.

“Florida’s exposures continue to grow. For example, the residential model exposure is 3.6 trillion in 2024, compared to 3.3 trillion in 2023, which is a 9.3 increase in growth. Citizens’ exposure grew by 31% in 2023, and is expected to grow by 7% this year, even though we expect only a slight change in the policy count in 2024,” said Montero.

The post Florida Citizens expects uplift in ROL as Board approves $5.5bn in coverage for 2024 appeared first on ReinsuranceNe.ws.

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