Citizens has reduced potential emergency assessments for Floridians by more than $3 billion— or 42 percent— from the 2012 hurricane season, through depopulation and risk transfer agreements.
The steps, which will see increasing levels of business ceded into the private sector, are part of a broader push by Citizens to reduce costs and streamline expenses.
According to Sharon Binnun, Citizen’s chief financial officer, 277,000 policies were returned to the private market in 2012. She commented: “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.”
Binnun told Bermuda:Re: “Citizens transfers risk like any other property insurance company would do, and only in the last several years have we begun to transfer risk in a consistent way each year. Our rates are capped— we do not get to pass through the rates of reinsurance like a private company does, but we do transfer risk every year, and last year we began to add capital markets as a complement to traditional reinsurance. Really the purpose is to provide us with claims paying resources so that we can reduce the amount of assessments after an event.”
According to materials from the Citizens Audit Committee Meeting, which took place on March 21, reinsurance premiums payable increased by $133.8 million, or 240 percent. According to Binnun the company has tripled the amount of reinsurance purchased since 2010. The number now stands at $1.7 billion.
Binnun said: “I don’t know how much more reinsurance we’ll end up buying. The goal is to get resources, not only for a single large event but for multiple small events, so that between our own resources and our risk transfer resources we have adequate funds to pay all of our valid claims in a timely manner and hopefully not have to levy assessments.”
Citizens Florida, depopulation, reinsurance, risk transfer