Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Florida’s state-backed insurer of last resort has purchased $3.56 billion in reinsurance cover for this year’s potentially devastating hurricane season.
In a Wednesday news release, Citizens Property Insurance Corporation said that the reinsurance would give the entity “the financial resources to pay claims following a 1-in-83-year hurricane without having to levy an assessment on most Florida insurance consumers.”
Newsweek contacted Citizens for comment by email on Friday morning.
More From Newsweek Vault: How Much Is My House Worth? How to Determine Your Home’s Value
It’s common for insurance companies to get reinsurance on their policies, especially in those areas that are most vulnerable to extreme weather events. But in Citizens’ case, this is a move that could reassure those who have grown concerned over what could happen should the insurer of last resort find itself having to repay hundreds of millions in damage claims this hurricane season.
Sean Rayford/Getty Images
Citizens has grown massively in the past few years, as Florida homeowners facing private insurers’ withdrawals from the state and coverage cuts have had to turn toward the only place where they cannot be denied insurance. In December 2023, Citizens had 1,167,579 policies in the state.
More From Newsweek Vault: How to Increase Your Home’s Value
While Governor Ron DeSantis has called for depopulating Citizens saying it’s already “not solvent,” Florida’s insurer of last resort cannot technically go insolvent, Charles Nyce, department chair and a Dr. William T. Hold associate professor of risk management and insurance at Florida State University, told Newsweek.
“They don’t go insolvent, they would do assessments to make up [a potential] shortfall,” he explained. “Essentially they can spread the cost of this year’s [potential] losses onto future years of Floridians.”
What can happen to Citizens is to run out of money. Because Citizens is backed by the Florida government, all Floridians who purchase property casualty insurance policies would pay a small percentage should the insurer not have enough funds to cover all claims. But according to Nyce, “it would take something near a 1 in 100 year event even before Citizens would run out of money” considering its current capital, plus reinsurance.
Citizens’ Chief Financial Officer Jennifer Montero told the Citizens Board of Governors on Wednesday that the insurer has now secured reinsurance coverage for $482 million. Combined with Citizens’ surplus and coverage from the Florida Hurricane Catastrophe Fund, the insurer wrote in a news release, Citizens now has $14.4 billion in claims-paying ability.
“We have always structured our reinsurance program based on our expected needs and the conditions of the global reinsurance market,” Montero said on Wednesday. “We followed that same strategy and believe the 2024 reinsurance program ensures Citizens has the strong financial ability to pay claims.”
In its outlook for this year’s hurricane season, the National Oceanic and Atmospheric Administration (NOAA) said it expects an 85 percent chance of an above-normal season, forecasting a range of 17 to 25 total named storms, of which eight to 13 are expected to become hurricanes. Between four and seven of these could be category 3, 4, or 5 hurricanes.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.