Citizens board approves $4.49 billion risk transfer against backdrop of 10% plus rate reductions

By David Bull

May 2 - (The Insurer) - The board of Citizens Property Insurance Corporation has approved management’s proposal for a $4.49 billion risk transfer program that will include $2.89 billion of new private risk transfer, which is expected to feature a significant portion of cat bond capacity and traditional capacity in a softening market.

The board met Wednesday to consider the proposed risk transfer structure laid out by chief financial officer Jen Montero.

The executive described “positive momentum” for the June 1 renewal against a backdrop of improved reinsurance market conditions for buyers, after “manageable” 2024 losses from Hurricane Helene and Hurricane Milton and the impact of litigation reforms.

Add improved earnings for reinsurers in 2024 and an increase in industry capital, and attractive conditions are expected to be in place for the midyear U.S. wind renewals.

Montero said rate reductions are expected to be in the region of 5% for layers on Florida programs below the state’s cat fund, and north of 10% for layers above the Florida Hurricane Catastrophe Fund, which is where Citizens buys its reinsurance protection.

She also noted that the cat bond market has seen “significant capital inflows” that have outpaced the traditional reinsurance market, “which will further encourage competitiveness within the traditional market.”

Citizens’ proposed 2025 risk transfer structure includes $1.6 billion of existing limit from multiyear deals placed in 2023 and 2024 and $2.89 billion of new private risk transfer.

The tower includes $394 million of occurrence limit in its sliver layer; a first layer split between traditional and capital markets of $2.5 billion of occurrence/aggregate cover; the 2023 multi-year Lightning Re collateralized reinsurance cover providing $500 million of aggregate limit; then three 2024 cat bond tranches providing $225 million, $425 million and $450 million of cover, respectively.

According to ILS-focused publication Artemis, Citizens is currently in the market with its Everglades Re II Series 2025-1 cat bond issue, which has lifted its target size from $1.4 billion to $1.525 billion, and would form more than half of the first $2.5 billion layer of the program.

In its presentation, Citizens said that the cost of its entire 2025 traditional and capital markets risk transfer program will not exceed $550 million, with contract terms set at one year in the traditional market and three years in the capital markets.