The Board of Governors of Florida’s Citizens Property Insurance Corp. has voted to transfer $30 billion of hurricane exposure from the state-run insurer to Florida-based Weston Insurance Co.
Weston will accept 23,000 personal residential wind-only policies, 5,000 commercial nonresidential wind-only policies, and 3,000 commercial residential wind-only policies from Citizens’ Coastal Account. The commercial residential wind-only policies are the first ever to be shifted out of the Coastal Account.
“Citizens is very excited about this first ever depopulation of commercial wind-only policies from our Coastal Account,” said Citizens President and CEO Barry Gilway in a statement. “We’ve already begun to receive positive feedback from other insurers and believe this agreement can serve as a model for future depopulation efforts.”
‘Culmination of Months of Work’
Weston Insurance Counsel Austin Neal, who also represents Lloyds of London in Florida, said in a statement, “Weston is very pleased with the action taken by the Citizens’ Board of Governors. Moving forward with this assumption of wind-only policies from Citizens is the culmination of many months of hard work by Weston, OIR [Office of Insurance Regulation] and Citizens.”
In an interview with the National Underwriter’s PropertyCasualty360.com Web site, Neal said reinsurers “feel they understand wind risk. To them, with wind-only, they know what they’re reinsuring.”
As part of the agreement, Weston will offer coverage comparable to what is offered by Citizens at the same effective rates as Citizens. Weston will also maintain Citizens’ statutorily mandated rate glide path (currently, rate increases of no more than 10 percent per year) for three years for all assumed policies and will retain all assumed polices for at least three years.
Less Taxpayer Risk
Citizens estimates the transfer will reduce by 11.9 percent the potential for post-hurricane emergency assessments on Floridians. With the $30 billion reduction in exposure, the probable maximum loss that Citizens’ Coastal Account would face in the event of a 1-in-100-year storm is roughly $840 million lower than it was before the transaction.
“This agreement is a win for Florida’s taxpayers. Every policy that is transferred from Citizens to the private market reduces the likelihood or severity of post-hurricane taxes that could impact every Floridian,” said Christian R. Cámara, Florida director of the R Street Institute. “However, the success of this and future take-out agreements depends on meaningful reforms by the Legislature to stop the current influx of new policies into Citizens.”