Florida’s Residents Property Insurance coverage Company now solely has disaster bonds in-force that occupy layers of its newly-combined single account reinsurance tower, after the final Everglades Re cat bond that offered protection solely for the previous Private Traces Account has been redeemed.
Florida Residents merged what had been its three so-called accounts (the Coastal Account, Private Traces Account and Business Traces Account) into which it segmented the coverage enterprise that it underwrote, right into a single Residents Account, successfully transitioning its reinsurance construction from three towers right into a single all-encompassing one.
It was seen as a set that might make reinsurance shopping for extra environment friendly for Residents, whereas additionally getting ready it for a smaller portfolio, because the depopulation program was and nonetheless is anticipated to pick-up tempo once more.
The primary reinsurance renewal the insurer of final resort has confronted with this merged, single reinsurance tower construction in place, was this yr in 2024 and so Residents had deliberate its exit from legacy reinsurance preparations that might not present related protection any extra.
Which meant that an early redemption was wanted, to cancel the protection from an Everglades Re II Ltd. (Series 2022-1) cat bond because it now not suits the brand new single reinsurance tower construction.
When that cat bond was initially issued, the phrases had an elective redemption baked in for Could fifteenth 2024, with a 1% of excellent principal premium needing to be paid. It’s not clear what phrases this redemption was effected at, however that appears a probable ballpark given it was documented as such.
That early redemption has now been accomplished and the Everglades Re 2022-1 notes have been cancelled and redeemed in full.
Now, with that cat bond redeemed, Florida Residents has $1.6 billion of disaster bond backed reinsurance in-force.
That puts the insurer in sixth place currently in our catastrophe bond sponsor leaderboard.
The $1.6 billion of cat bond safety is derived from the $500 million Lightning Re Ltd. (Series 2023-1) industry-loss set off cat bond, that Residents bought as a strategy to span the change from multi-accounts, to the one account and reinsurance tower it has in the present day.
Whereas the Lightning Re cat bond just isn’t scheduled for maturity till the tip of March 2026, there’s a probability that might come up for redemption in future as nicely.
Now that the one reinsurance tower is in-place, it is perhaps most well-liked at Florida Residents to transition again to indemnity triggered disaster bonds for that slice of its reinsurance safety as nicely, particularly if the coverage depend continues to fall.
The Lightning Re cat bond does have elective redemption dates in its phrases, for April 2024 and 2025. With the primary date now handed, Residents can have an choice to redeem its industry-loss cat bond subsequent yr.
The rest of Florida Residents in-force cat bond protection comes from this yr’s $1.1 billion Everglades Re II Ltd. (Series 2024-1) issuance.
That cat bond supplies Residents three years of reinsurance on an indemnity and annual combination foundation, so may be extra tightly calibrated alongside its conventional reinsurance preparations.
For the 2024 hurricane season, Florida Residents can have a focused $5.5 billion of safety from reinsurance and disaster bonds in-place.
Cat bonds have shrunk as a proportion of the general Residents reinsurance tower lately, however this has been largely pushed by the change to the one account and tower and we suspect cat bonds may rebuild in significance for Residents in future years.
