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Reinsurance prices have dropped since Florida’s 2022-2023 litigation reform measures were enacted, but the biggest rate reductions are mostly for reinsurance above what the Florida Hurricane Catastrophe Fund provides, Citizens Property Insurance Corp. officials said this week.

“Rate reductions are expected to be in the range of approximately 5% for the layers below the Florida Hurricane Catastrophe Fund and north of 10% for layers above the Cat Fund,” Citizens’ Chief Financial Officer Jennifer Montero said at a special Board of Governors meeting Wednesday.

That means “it is not currently cost efficient for Citizens to purchase risk transfer below the Cat Fund attachment point” ahead of the June 1 renewal date.

With that, the board voted unanimously to take the bold step of avoiding private reinsurance for losses incurred below the Cat Fund’s retention point. The move signifies that in case of a 100-year storm event this year Citizens would have to burn through its $2.5 billion surplus first, before making claims with the Cat Fund and private reinsurers.

That could result in a $42 million surcharge on Citizens’ policyholders if a massive hurricane – or two – hits Florida in the next six months. At Citizens’ current level of policies in force, about 841,000 as of the end of March, that could amount to an average assessment of about $49 per policyholder.

But Citizens’ leadership, recently adamant about obtaining better reinsurance rates, suggested that plan is less of a risk and is a better deal than paying for costly private reinsurance.

“I don’t recall the total amount of claims that were made against the reinsurance that we had purchased over the years, but the cost of the reinsurance significantly exceeded the amount of claims made against it,” said Board member Robert Spottswood, a Key West attorney and developer.

Board Chairman Carlos Beruff said he has urged Citizens staff and other board members to walk away from reinsurance if prices don’t seem fair in light of the 2022-2023 reforms that have greatly reduced claims litigation and costs.

“If every governor has that same opinion, it sends a very clear signal to the markets that we’re just not buying unless the price makes sense, and if it doesn’t make sense, we’ll go without buying as this organization has done in prior years,” Beruff said at the meeting.

In March, Citizens officials appeared to play hardball with a few reinsurance firms, asking for a double-digit rate cut for the June 1 renewals, or else some reinsurance brokers would be given the cold shoulder, according to industry news reports.

The total risk transfer amount approved at the Wednesday board meeting comes to almost $4.5 billion, which includes premiums due for the 2023 and 2024 programs. The total premium will be about $550 million.

The 13-minute board meeting can be seen on .

Top photo: Citizens’ reinsurance tower, presented at the meeting this week.

Topics Florida