Florida's Insurers Healthy After Storm-Free Season

hurricane-wilma-credit-noaa.jpg

BRADENTON, Fla. - The 2014 Atlantic hurricane season ended Sunday leaving Florida unscathed and its two publicly operated storm insurers in good financial health.

The six-month season produced only two major hurricanes and six smaller named storms, none of which threatened the Sunshine state.

A nine-year lull between major hurricanes has given Citizens Property Insurance Corp. and the Florida Hurricane Catastrophe Fund time to rebuild fund balances, while maintaining credit ratings. The state's private property insurance market has also stabilized, and grown.

Citizens and the Cat Fund can issue tax-exempt bonds pay for damage claims, if needed. Bonds are mainly secured by assessments on their own policies as well as nearly all property insurance policies in the state.

The storm-free season allowed Citizens, which remains the largest property insurer in Florida, to continue shedding policies and reduce its exposure by transferring policies to the private sector through a clearinghouse program.

As of Nov. 28, the insurer had 727,125 policies with a total exposure of $229.2 billion, a 27% drop in the number of policies that were in force on Jan. 1, and a reduction of $85.6 billion in exposure for the year.

"We have been fortunate to have avoided a major hurricane for nine years, but Florida must continue its preparation for the next major windstorm," said Citizens Board of Governors Chairman Chris Gardner.

"Citizens remains steadfast in its efforts to shore up its foundation and reduce assessment risk for Floridians by helping property owners find coverage outside Citizens, and ensuring that we provide quality service to those who still count on Citizens to protect their homes and businesses," he said.

Citizens has two accounts, one for policies along the coast and a separate account for personal and commercial residential multi-peril policies elsewhere in the state.

For 2014, Citizens projected having $6.02 billion in liquid resources on hand to pay claims in the coastal account, and $5.57 billion for the personal and commercial account, according to figures available on its website.

Citizens bonds are rated A-plus by Fitch Ratings and Standard & Poor's, and A2 by Moody's Investors Service.

The Florida Hurricane Catastrophe Fund was created to help stabilize the private market by offering low-cost reinsurance. Nearly all property insurers are required to participate in the Cat Fund, including Citizens. However, its exposure is dependent on the amount of losses incurred up to a statutory limit set by the Legislature.

As of Dec. 31, the Cat Fund projected having a fund balance of $10.9 billion.

Additional resources - if needed to pay hurricane losses - would come from $2 billion in bonds already sold to provide liquidity. The agency could issue up to $4.06 billion in new bonds if additional financing is needed to pay for damages.

The Cat Fund's bonds are rated AA by Fitch, Aa3 by Moody's, and AA-minus by S&P.

For reprint and licensing requests for this article, click here.
Florida
MORE FROM BOND BUYER