Citizens Wants To Spend More On Reinsurance
|By Charles Elmore, The Palm Beach Post, Fla.|
|McClatchy-Tribune Information Services|
Travel to meet with reinsurers in the
State-created Citizens spent nothing on private reinsurance as recently as three years ago, but company officials portrayed the trend as a success. Reinsurance is coverage that insurers can buy from other companies.
"I was absolutely amazed at the incredibly positive reaction we received from the market," Gilway said.
The board approved the concept of putting
Reinsurance would help reduce the risk of assessments to Citizens customers and others in the rare instance of, say, a once-a-century megastorm. It would provide
But Citizens does not pose a risk of assessments in most storm scenarios now.
No assessments are projected in 2013, for example, with a repeat of the multi-storm 2004 season, or the 2005 season with Hurricane Wilma.
The increased spending on reinsurance means Citizens is on track to contribute 23 percent less to its claims-paying surplus than it did last year.
Unlike private reinsurance, money put into the surplus is available year after year to grow and act as a reserve to pay claims. Money spent on reinsurance premiums simply goes into the pockets of private reinsurers if not needed in the contract period, typically one or two years.
Under contracts in effect last year involving underwriter
Citizens' risk exposure is shrinking, meanwhile, thanks to programs that transferred about 277,000 customers to private carriers in recent months. A pending deal would see 31,000 coastal customers move to newly-formed
(c)2013 The Palm Beach Post (West Palm Beach, Fla.)
Visit The Palm Beach Post (West Palm Beach, Fla.) at www.palmbeachpost.com
Distributed by MCT Information Services