Florida’s insurer of last resort, Citizens Property Insurance Corp., has secured $3.564 billion in reinsurance coverage to mitigate potential losses from hurricanes during the 2024 season. This move will help protect the insurer and its policyholders from financial strain in the event of significant storm damage.
The reinsurance purchase, costing $482 million, is designed to act as a backstop for claims payments, supplementing Citizens’ own funds. While the initial budget allowed for up to $5.5 billion in coverage, negotiations resulted in a more “cost-efficient” program.
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Reinsurance is vital in Florida’s insurance market, providing insurers with additional resources to cover claims after major hurricanes. In the case of 2022’s Hurricane Ian, Citizens recovered over $1 billion through its reinsurance contracts.
In addition to private reinsurance, Citizens also benefit from lower-cost coverage through the state-run Florida Hurricane Catastrophe Fund.
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Citizens, currently the largest property insurer in Florida with over 1.2 million policies, has seen significant growth in recent years due to other insurers dropping customers and raising rates. Suppose the insurer’s funds and reinsurance prove insufficient after a major storm. In that case, it can levy assessments on its policyholders and potentially even those of other insurance companies to cover the deficit.
This proactive step towards securing reinsurance coverage is crucial in protecting the financial stability of Citizens and its policyholders as the hurricane season progresses.
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