Florida’s insurer of last resort, Citizens Property Insurance Corporation, has narrowed its estimated range of losses from Hurricane Ian, now saying it expects them to fall between $2.3 billion and $2.6 billion, with private reinsurance recovery levels small if generally will be. , while its disastrous Everglades Re bonds may be safe.

Citizens previously estimated the immediate aftermath of Hurricane Ian in Florida at about $3.8 billion with a possible burden of claims of 225,000 people.

That was later stepped up, with the insurer saying it expected losses of between $1.9 billion and $3.7 billion, with the number of claims ranging from 100,000 to 150,000.

This was based on the best case modeled compensation and loss adjustment (LAE) costs from Hurricane Ian before risk transfer was considered.

The latest update from the Florida Nationals estimates losses from Hurricane Ian at $2.3 billion to $2.6 billion, excluding claims below the deductible or any burden for potential litigation.

The preliminary estimate also did not include lawsuits or any social inflation factors, and the number of claims after including the deductible and social inflation factors remains around 225,000.

So far, 34,000 claims have been filed by Florida citizens as of 11 a.m. ET on October 5.

The insurer has established two disaster response centers in Port Charlotte and Fort Myers to assist its policyholders.

So what does all this mean for Florida Citizens Reinsurance Tower and of course its Everglades Re bonds?

It is extremely difficult to say at this point, as how the claims land on the Coastal and Personal Lines accounts would seem to be the main factor in whether the insurer gets to use its reinsurance to get any support in paying them.

It appears likely that the so-called “shard” of the Florida Citizens Reinsurance Tower may be affected, as in the Coastal account, which has an $803 million loss, while the Personal Lines account has $1.277 billion. the last layer maps seen by Artemis.

These “partial” layers of the private reinsurance market are quite small and extend quite high into the tower, filling the layers next to the FHCF, so if that’s all that is at risk of attachment, the impact on the private reinsurance market seems quite low (potential lawsuits and social inflationary effects are not taken into account).

As for the Everglades Re disaster bonds, if Florida’s claims stay in the range they estimate and welfare inflation isn’t a significant factor driving them up, it looks like they could all be safe at this point.

In Citizens Coastal Account, $275 million Series 2021-1 Coastal Account Class B Notes Tranche tie more than $2.592 billion in losses to this section of the Citizens portfolio and are the lowest level of cat bond reinsurance coverage in the Coastal Account.

On the Personal Lines account side $100 million Series 2020-2 Class A Everglades Re II Notes losses exceed $4.115 billion, and the 2021-2 Series A bonds are just above that at $4.128 billion, suggesting that both should be protected against losses.

So, right now, as the Citizens losses get closer to being estimated, it looks like the Coastal Account cat bond could be attached, but only if all of the Citizens losses are in that account, which seems highly unlikely.

These notes were reduced in the valuation charts on Friday, not significantly, from the high single digits to the low double digits, but there is a good chance that these valuation bonds could see their value recover once the drop in loss estimates is taken into account.

Of course, it’s still very early days, and lawsuits or welfare inflation could increase the losses to Florida citizens. But based on estimates, it appears at this stage that the impact on the reinsurance market for citizens may be relatively low, while cat bonds may prove safe.

Of course, the surplus is slated to be cut, and FHCF reinsurance coverage will likely be used to help citizens pay claims.

Time will tell, however, and whether they are immune to the damage caused by Hurricane Ian will not be known for long.

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