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Collateralised reinsurers lead the way for Citizens 2021 renewal

7th June 2021 - Author: Luke Gallin

The largest slice of Florida’s Citizens Property Insurance Corporation’s 2021 traditional reinsurance renewal went to providers of collateralised reinsurance, with these participants committing more limit than domestic and Bermuda reinsurers combined.

citizens-logoFor both the Coastal Account and Personal Lines Account segments of its $4.487 billion reinsurance tower, Citizens has secured a total limit of almost $1.65 billion for 2021.

Of this, $875 million or roughly 53% has been secured from the insurance-linked securities (ILS) market on a collateralised basis. 

Coverage secured by collateralised reinsurers was led by the world’s largest ILS fund manager, Nephila Capital, which showed its commitment to the Florida property market with a $600.1 million placement, by far the largest participant in Citizens’ 2021 traditional reinsurance renewal.

Interestingly, Nephila’s $600.1 million commitment is spread across each layer of the 2021 program. 

The next largest participant, both on a collateralised basis and overall, was D.E. Shaw Re, the reinsurance arm of the hedge fund investment group.

Citizens secured almost $170 million of its total limit from D.E. Shaw during the recent renewal, although only participated in around half of the layers on offer.

For Citizens, reinsurance limit secured on a collateralised basis also came from LGT Capital ($59.5mn of limit), Fermat Capital ($29.3mn of limit), Securis ILS Management ($11mn of limit), and Quantedge ($4.6mn of limit).

These commitments, combined with strong participation from both Nephila and D.E. Shaw, account for more than half of the reinsurance limit committed to Florida Citizens renewal program.

In fact, Nephila’s dominance in the placement ensured that the $875 million of collateralised reinsurance limit secured by Citizens is more than the combined level of protection secured from domestic and Bermuda reinsurers, which amounts to approximately $679.7 million.

Led by Validus Re’s $153.3 million commitment, Bermuda reinsurers’ participation amounted to just shy of $333.6 million, or a little more than 20% of the total $1.65 billion program.

Of the Bermudians, Lancashire Insurance Company provided the second largest portion of reinsurance for the 2021 program. The company’s $48.7 million commitment sits within just one, single-year occurrence layer of Citizens’ Personal Lines Account placement.

Fronted by global reinsurer Hannover Re, Bermuda-based ILS manager Pillar Capital provided $48.1 million of total limit spread across four layers of the 2021 program, taking the level of limit provided by third-party capital and ILS market sources even higher.

Also from Bermuda, Citizens secured limit from Ariel Re Bermuda, Ark Bermuda, PartnerRe, SiriusPoint, Vantage Risk, and RenaissanceRe.

Interestingly, for a large reinsurer, RenRe’s participation in Citizens’ 2021 traditional reinsurance placement appears relatively low, at roughly $10.3 million, which includes $2.7 million of limit from its Lloyd’s Syndicate 1458.

While we can’t be sure, this is perhaps a sign that the company is wary of the Florida property market in light of expectations for another above-average Atlantic hurricane season.

Looking at the domestic U.S. reinsurers that took a share of Citizens’ 2021 renewal, and a $125 million commitment from Munich Reinsurance America led the way.

This was followed by a $110 million placement from Swiss Reinsurance America Corporation, and $36.5 million of total limit from Everest Re.

Reinsurance limit secured by Citizens from domestic players also included $31.8 million of protection from Transatlantic Reinsurance Company, $21.3 million from Odyssey Reinsurance, $16.6 million from Berkshire Hathaway, and almost $5 million of limit was secured from American Standard Insurance Company of Wisconsin.

All in all, limit provided by domestic reinsurers amounted to $346.1 million, or roughly 21% of the total $1.65 billion program for 2021.

Additionally, ILS market participant Leadenhall Capital Partners backed more than $27.6 million of the renewal for Florida Citizens, working with Amlin’s Lloyd’s syndicate 2001. While the Lloyd’s operations of Chaucer, Talbot, Ascot, Amlin, Beazley, and MAP also participated in the renewal.

Combined with RenRe’s syndicate, these carriers provided $91.5 million of reinsurance limit for the placement.

The only international reinsurer to feature in Citizens 2021, traditional reinsurance renewal was Korean Re. The company participated in two layers, providing limit of roughly $2.7 million.

Alongside its traditional reinsurance placement, Citizens recently secured $950 million of reinsurance from the capital markets via its Everglades Re II Ltd. (Series 2021-1 & 2021-2) catastrophe bonds.

These deals, combined with the firm’s outstanding $110 million Everglades Re II Ltd. (Series 2020-2) transaction from last year, means the carrier has $1.06 billion of cat bond backed reinsurance in-force for the 2021 season.

So, overall, Citizens has secured around $2.7 billion of reinsurance limit to help it pay for losses from hurricanes throughout the 2021 season, from the traditional market, the ILS market, and other third-party reinsurance capital collateralized sources.

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