It cost $482 million for Florida's Citizens Property Insurance to buy reinsurance this year

The state’s Citizens Property Insurance Corp. has purchased $3.564 billion in reinsurance coverage — at a cost of $482 million — to serve as a backstop for paying claims during this year’s hurricane season.

The Citizens Board of Governors in May approved spending as much as $750 million to buy up to $5.5 billion in reinsurance.

But the ultimate reinsurance purchases remained subject to negotiations, and material slated to go before the Board of Governors on Wednesday said Citizens ended up with a “cost-efficient risk transfer program of approximately $3.564 billion.”

Reinsurance plays a critical role in the Florida market, as it can help insurers pay claims if hurricanes cause major damage.

As an example, Citizens had $3.596 billion in direct losses and related expenses in 2022’s Hurricane Ian, according to information presented Tuesday during a Citizens committee meeting.

Citizens was able to recover $1.1216 billion of that amount under its reinsurance contracts, reducing its losses and expenses to $2.4744 billion.

In addition to buying reinsurance on the private market, Citizens and other carriers also get certain amounts of lower-cost coverage through the Florida Hurricane Catastrophe Fund, a state-run program.

Citizens, which was created as an insurer of last resort, is by far the state’s largest property insurer, with 1.215 million policies as of Friday.

Its policy count has surged in recent years as private insurers dropped customers and raised rates because of financial problems.

If Citizens does not have enough cash and reinsurance to pay claims after a big storm, it has the power to collect additional money from its customers — and potentially even from customers of other insurance companies — to cover the costs through what are known as assessments.

The hurricane season started June 1 and will end Nov. 30.