Florida Citizens aims to secure $2.94 billion in new reinsurance and catastrophe bonds for 2025.

Florida’s Citizens Property Insurance Corporation, the state’s insurer of last resort, plans to secure $2.94 billion in new traditional reinsurance and catastrophe bonds for the 2025 hurricane season. This would bring its total risk transfer to $4.54 billion for the year.

Currently, Florida Citizens has $1.6 billion in outstanding catastrophe bonds providing coverage through 2025. Additionally, $1.1 billion of aggregate reinsurance remains available from the Everglades Re II Ltd. (Series 2024-1) catastrophe bond, which extends through both the 2025 and 2026 wind seasons. Another $500 million in industry-loss-based reinsurance is still active from the Lightning Re Ltd. (Series 2023-1) catastrophe bond, covering only the upcoming hurricane season before maturing early next year.

By leveraging its multi-year catastrophe bond program, Citizens is seeking to enhance its financial certainty while securing additional reinsurance and cat bonds to reach its $4.54 billion target. To fund this risk transfer and reinsurance protection, the insurer has allocated a budget of approximately $650 million in premiums for 2025. This marks a decrease from the $700 million budgeted in 2024, which itself followed a projection of $695.2 million for 2023.

This reduction in budgeted premiums aligns with Citizens' declining exposure due to its depopulation program, which has led to a drop in its policy count. By the end of November 2024, the number of policies fell below 1 million, and by February 2025, it had further declined to 847,571. Consequently, the 1-in-100-year probable maximum loss (PML) is now estimated at $12.86 billion at the end of 2024, down from over $17 billion projected in late 2023.

In response to this reduced exposure, Citizens plans to acquire $2.94 billion in new private risk transfer—comprising both traditional reinsurance and catastrophe bonds—on top of its existing $1.6 billion in catastrophe bond protection. Some of the traditional reinsurance may also come from collateralized sources, as insurance-linked securities (ILS) funds frequently participate in such transactions.

At its 2024 renewal, Citizens secured nearly $1.3 billion of protection from ILS and collateralized markets as part of its traditional reinsurance tower. For 2025, the reinsurance structure is expected to include a traditional reinsurance "sliver layer" alongside the Florida Hurricane Catastrophe Fund (FHCF), which will provide $3.548 billion in coverage—down from the $5.02 billion utilized in 2024 due to reduced exposure.

Above the FHCF layer, the reinsurance structure will incorporate $1.6 billion in existing catastrophe bonds and approximately $2.55 billion in new reinsurance and catastrophe bonds, all structured as annual aggregate coverage. The surplus has eroded compared to the previous year, which means reinsurance coverage could attach at an estimated $2.547 billion in losses for 2025.

At its 2024 reinsurance renewal, Florida Citizens had $3.154 billion in surplus within its bottom layer. If it successfully secures the targeted $2.94 billion in new risk transfer, bringing its total private market risk transfer to $4.54 billion, it would fully utilize its surplus and potentially trigger a Citizens policyholder surcharge of $559 million for a 1-in-100-year event in 2025.

Florida Citizens is currently collaborating with brokers, advisors, and market participants to design, structure, and price its 2025 reinsurance and catastrophe bond placements. However, it is worth noting that despite targeting $5.5 billion in reinsurance and risk transfer for 2024, Citizens ultimately secured just under $3.6 billion due to high pricing constraints.

The proposed 2025 risk transfer structure is designed to ensure liquidity, enabling Citizens to access reinsurance recoveries ahead of claim payments after a triggering event. This approach aims to minimize or eliminate assessments while preserving surplus for multiple events or future seasons. Given the favorable conditions observed in recent catastrophe bond market executions, Citizens is expected to issue a significant new bond in the coming weeks.