Citizens breaks world record for largest bond issued
Florida’s Citizens Property Insurance has issued the largest catastrophe reinsurance bond in world history. Citizens made a powerful entry into the catastrophic bond market late last week, issuing more than $750 million in bonds. The bonds are considered to be the largest insurance-linked security in the world, putting Citizens in a powerful position in the bond market. Though the state-run insurance organization has been facing daunting financial problems, the bonds are expected to help solve these challenges.
Bonds worth more than $750 million, breaking previous record holder of $600 million
The bonds are being issued through Everglades Re, a specialty insurer that was established for no other reason but to issue the Citizens bonds. Citizens has been planning to issue these bonds for some time. The company planned for the bonds to be offered at $200 million, but interest from inventors caused the price of the bonds to skyrocket. Citizens notes that 32 as yet to be identified investors contributed to the growing price of the bonds. These bonds broke the previous world record holder, which had come from Residential Reinsurance in 2007, valued at $600 million.
Money to be used to bolster Citizens’ services
The money collected from selling the bonds will be used by Citizens to embolden its coastal and personal lines accounts. This is expected to bring better benefits and expanded coverage for policyholders along Florida’s coasts. These policyholders have long had to juggle coverage because many of the Florida insurance companies do not offer wind coverage, while others do not offer flood coverage. Many of Citizens’ own policies have similar exclusions. For these policies, the bonds would help provide a safety net that would help cover unexpected losses.
Officials to seek more private money in the future
Citizens officials claim that this is the first of many insurance-linked securities deals to come. The organization’s board of governors has expressed interest in pursuing money from private investors, hoping to bring more benefits to consumers and improve the company’s financial standing. The board is scheduled to meet later this month to evaluate the company’s position and establish a framework that will structure its future investment strategies.