Florida’s Citizens Property Insurance Corporation is planning to call its $1.1 billion of Everglades Re II Ltd. (Series 2024-1) catastrophe bonds in advance of its renewal, to enable it to take advantage of current market conditions and may sponsor issuance of around $600 million of new cat bonds this year to make a saving on its risk transfer costs.
That’s a considerably reduction from the $4.49 billion of reinsurance risk transfer it had in-force through the 2025 hurricane season, but a steep reduction in exposure at the insurer of last resort means that less cat bond and reinsurance protection is required this year.
Citizens said that it entered 2026 with 67% less exposure in-force, thanks to its efforts to depopulate and shift policyholders back to the private market.
As we explained in our article earlier today, after an upcoming maturity of the $500 million Lightning Re Ltd. (Series 2023-1) industry loss triggered cat bond Citizens will still have $2.625 billion of indemnity cat bonds from the Everglades Re series of deals outstanding.
But new board documents that were published today show that Citizens is planning to call and make an early redemption of its $1.1 billion Everglades Re II catastrophe bonds, which will reduce that total.
The effect of that will be more fresh reinsurance risk transfer will be required to be secured in the run-up to the mid-year 2026 renewals, from either the traditional and collateralized or catastrophe bond markets.
On the 2024-1 cat bonds, Citizens’ board document explains, “The Everglades Re II Series 2024-1 bonds are callable on May 13, 2026 subject to Citizens’ total insured value as of February 28, 2026, at an optional call premium of 0.50%, if Citizens’ total insured value is less than or equal to $427.92 billion. As of February 27, 2026, Citizens’ total insured value was $104.61 billion, which permits Citizens to call the Everglades Re II Series 2024-1 bonds at par value and with an optional call premium of 0.50%. Citizens must notify investors if it intends to call the bonds at least 10 business days (April 29, 2026) and no more than 75 calendar days (February 27, 2026) prior to the optional redemption date of May 13, 2026.
“By calling the Everglades Re II Series 2024-1 bonds, Citizens will have flexibility to optimize the structure of its 2026 risk transfer program and will be able to take full advantage of current market conditions. Citizens has less demand for risk transfer for the 2026 hurricane season due to depopulation and its shrinking exposure. Based on these factors, we believe it is the most efficient option to call the $1.1 billion of Everglades Re II Series 2024-1 bonds on the optional redemption date of May 13, 2026, and issue approximately $600 million of 2026-1 bonds at a gross ROL that is approximately 30% lower than the 2024-1 bonds, which would save approximately $67 million.”
Here, Florida Citizens is referring to the fact risk interest spreads are dramatically lower in the catastrophe bond market now, than they were in 2024 when those bonds were issued.
So, by calling them early and paying a small amount for that, Citizens can come back to market and sponsor a cat bond it hopes will be meaningfully cheaper.
Once called and redeemed, Citizens would have $1.525 billion of outstanding catastrophe bonds still in-force.
Another board document explains the projection for reinsurance need has now been honed to $2.98 billion for 2026.
The below statement takes into account the early redemption of the Everglades Re II 2024-1 cat bonds.
“Citizens aims to secure private reinsurance coverage of approximately $2.98 billion. This coverage would be comprised of $1.53 billion of existing private risk transfer remaining from 2025, and $1.45 billion of new private risk transfer, with budgeted premiums of approximately $350 million. Under this scenario, Citizens would expose 26% of its surplus for a 1-in-100-year event,” Citizens board document explains.
The existing private risk transfer is therefore all cat bond based. So if Citizens does only seek around $600 million in new cat bond coverage this year, its outstanding limit from the cat bond market could be $2.13 billion for the 2026 hurricane season.
Citizens further explained that its proposed risk transfer layers for 2026 are: a sliver layer to sit alongside the FHCF providing $170 million of occurrence limit excess of $1.14 billion; a $2.81 billion layer 1 made up of renewed $1.53 billion of aggregate coverage cat bonds and a further $1.28 billion of occurrence and aggregate cover from traditional and capital markets (which would include any new cat bonds).
Meetings held this week will set the final direction, but it appears Florida Citizens is set on the early redemption and only partial replacement of that coverage with new catastrophe bonds.
However, should the cat bond market prove especially conducive, in pricing terms, the $600 million of 2026-1 cat bonds mooted could always increase.
Read about every one of Florida Citizens catastrophe bonds in our extensive Deal Directory.
