Citizens Cat Bond Underscores that Private Market Can Absorb Hurricane Risks

Published April 23, 2012

The Heartland Institute today welcomed news that Florida’s Citizens Property Insurance Corp. is preparing the largest catastrophe bond issuance in history, with a $750 million offering through its Bermuda-based Everglades Re Ltd. vehicle.

Originally planned as a $200 million issuance, market sources are reporting that Citizens’ Everglades Re has been upsized during the marketing process and would now be the largest single tranche, single-peril catastrophe bond of all time. If the offering reaches $750 million, it would account for 75 percent of the $1 billion in private reinsurance Citizens has budgeted for this year.

The following statements from insurance experts at The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Tammy Nash at [email protected] and 312/377-4000. After regular business hours, contact Jim Lakely at [email protected] and 312/731-9364.

“Every dollar of risk Citizens Property Insurance Corp. transfers to the private sector is a benefit for Florida taxpayers. Citizens is spread too thin and unfortunately, due to political decisions, does not collect the amount of premium it needs to cover its risks. This risk transfer is a major step in the right direction to decrease the likelihood or severity of a massive taxpayer-funded bailout after a bad hurricane season.”

Christian Cámara
Director, Florida Insurance Project
The Heartland Institute
[email protected]

“This news underscores that the private capital markets are still eager to take on catastrophe risk, even without the backing of the federal government that many Florida lawmakers have sought over the years. We’re encouraged that Citizens is looking to transfer risk to the global reinsurance markets, rather than seeing it concentrated within the state.”

R.J. Lehmann
Deputy Director, Center on Finance, Insurance, and Real Estate
The Heartland Institute
[email protected]

The Heartland Institute is a 28-year-old national nonprofitorganization with offices in Chicago, Illinois and Washington, DC. Its mission isto discover, develop, and promote free-market solutions to social and economicproblems. For more information, visit our Web site or call 312/377-4000.