Citizens Property Insurance Corporation Plans for 2025
Florida’s Citizens Property Insurance Corporation, recognized as the state’s property insurer of last resort, is gearing up to acquire additional private market risk transfer valued at $2.94 billion. This strategic move aims to secure substantial reinsurance coverage of about $4.54 billion for the year 2025, with the projected cost in premiums estimated at approximately $650 million.
In December, Citizens anticipated the need to secure approximately $4.453 billion in reinsurance from both the traditional and capital markets for 2025. This represents an increase from the $3.564 billion secured for 2024. Of this, $3.064 billion was newly placed. However, the 2025 forecast incorporates $2.94 billion of new private risk transfer, leveraging $1.6 billion of existing coverage still effective from previous years.
Citizens aims to secure this reinsurance with an expenditure of roughly $650 million, while the 2024 arrangement cost around $482 million. According to Citizens, “Staff will partner with traditional and capital markets teams, alongside its financial advisor, to assess available options regarding structure, terms, pricing, and other pertinent aspects related to the 2025 risk transfer program. Recommendations will be presented to the Board in April for final approval.”
Potential Financial Implications
Under the proposed 2025 strategy, Citizens would expose all its surplus with a potential policyholder surcharge of $559 million for a 1-in-100-year event. The proposal for 2025 also includes adjustments to various layers of coverage, including the amount of surplus and the Florida Hurricane Catastrophe Fund (FHCF) coverage.
The plan features a “Sliver layer” that complements FHCF coverage of $3.548 billion, delivering about $394 million of traditional reinsurance coverage, which exceeds $2.55 billion in surplus. This annual, per occurrence coverage spans personal and commercial residential losses, functioning in conjunction with mandatory FHCF coverage.
For 2024, the Sliver Layer provided approximately $630 million alongside FHCF coverage of $5.02 billion, with a surplus excess of $3.154 billion. Thus, the initial reinsurance coverage slice for 2025 is anticipated to attach at a lower level. Compared to December 2024’s projections, the latest update places FHCF coverage about $100 million lower for 2025, though offset by a larger Sliver Layer than previously estimated.
Reinsurance Structure for 2025
Above the Sliver Layer and FHCF, Layer 1 for 2025 is designed to offer $4.15 billion in coverage for residential losses from capital and traditional reinsurance markets. This includes around $2.55 billion in occurrence and annual aggregate protection, alongside in-force coverage of $500 million from Lightning Re Ltd. (Series 2023-1) and $1.1 billion via Everglades Re II Ltd. (Series 2024-1), two catastrophe bonds sponsored by Citizens.
The overall proposal for 2025 suggests extending the top of Citizens’ risk transfer tower to $12.859 billion, with reinsurance coverage ending at $11.089 billion in loss and loss adjustment expenses (LAE). This marks a notable shift from 2024, where reinsurance coverage, both traditional and capital, concluded at $15.733 billion in loss and LAE, with the tower reaching $17.424 billion, inclusive of emergency assessments.
