Florida Citizens' 2026 catastrophe program totals $2.816 billion at a weighted-average net rate-on-line of 9.52%, with $2.125 billion funded through catastrophe bonds and $691 million through traditional reinsurance. New placements cleared at 8.46% ROL, 29.2% below 2025. The 75/25 split toward capital markets is the most bond-heavy publicly documented catastrophe tower in the US market, and the layer detail is what makes it usable as a benchmark.

Key Takeaways

  • $2.816 billion at a 9.52% weighted net ROL, of which $1.525 billion is seasoned bonds from the 2023, 2024 and 2025 vintages: roughly 54% of the tower carries above-market protection at no current-year placement cost.
  • The entire $160 million sliver layer is traditional reinsurance. Capital markets are kept out of first loss entirely, and their share rises with attachment.
  • The Everglades Re II 2024-1 early call nets $72.7 million, replacing $124.8 million of remaining coupon with $46.6 million over the equivalent period, against a 0.50% call premium of roughly $3 million.
  • 8.46% marginal ROL against 11.95% on comparable 2025 placements is the market-clearing reference a Florida domestic can audit its own renewal against.
  • Policy count fell from about 1,072,500 in June 2025 to just over 293,000 a year later, a 72.7% reduction that reshapes what any pre-depopulation trigger specification is measuring.

Where Each Funding Type Sits in the Tower

The aggregate 75/25 ratio says less than the placement by layer.

Layer Total Traditional New 2026 Cat Bonds Seasoned Cat Bonds
Sliver $160M $160M --- ---
Layer 1 $225M --- --- $225M
Layer 2 $850M $250M $225M $375M
Layer 3 $850M $175M $200M $475M
Layer 4 $731M $106M $175M $450M
Total $2,816M $691M $600M $1,525M

The sliver is entirely traditional, keeping the capital markets out of the first-loss position. Every layer above it is hybrid, and the bond share grows as attachment increases. The tradeoff is deliberate: traditional tranches reset annually, so as the book keeps shrinking under depopulation they can be reduced or restructured without bond covenants or call premiums, while the bond layers above hold rate certainty across multiple years.

The $1.525 billion of seasoned bonds carried from 2023, 2024 and 2025 issuances was priced in a harder market and now anchors Layers 1 through 4 below current clearing spreads. Citizens entered the renewal already holding roughly 54% of its tower without a current-year placement cost. The new $600 million Everglades Re II 2026-1 fills the gap left by the 2024-1 call, taking total program cost to $276.5 million, about 20% under the equivalent 2025 program.

Those maturities are staggered across vintages, and 2026-1 priced at a three-year term maturing in 2029. No single renewal season requires replacing the whole capital markets position at once, which converts one binary renewal risk into a sequence of smaller placements.

The Call Arithmetic and What the Marginal Rate Audits

Citizens redeemed the Everglades Re II 2024-1 bonds early and replaced them at softer spreads. Holding to year-three maturity would have cost $124.8 million in remaining coupon; the 2026-1 replacement costs $46.6 million over the equivalent coverage period, for $72.7 million net.

The decision is actuarial rather than mechanical because of what sits against that figure. The redemption carried a 0.50% call premium on the $600 million notional, roughly $3 million direct. It also required announcing the call before the replacement was priced, so a market disruption in between would have left a coverage gap at a moment when terms could have moved. Citizens executed cleanly, upsizing from a $450 million target to the full $600 million at below-guidance spreads.

That is the same structure as a liability-side ALM decision: expected cost of holding to maturity, expected cost of replacement at current spreads, the option value in the call provision, and the execution risk of placing the replacement. Every callable bond approaching its redemption window puts it back on the table.

The 8.46% marginal ROL against 11.95% on comparable 2025 placements then works as an audit rate. Gallagher Re's June 1 Florida portfolio averaged a 22.8% decline clustered in a 20 to 25% range, and Howden Re put risk-adjusted property cat pricing down up to 25% at June 1, accelerating from 16% at April 1 and 14.7% at January 1.

A carrier renewing materially above Citizens' marginal rate has three defensible answers: it retains lower-attaching layers where risk-adjusted cost per dollar of limit is structurally higher, it lacks Citizens' scale in accessing the bond market directly, or it carries concentrations that justify a structure premium. Absent one of those, the renewal simply cleared above market.

The Seasoned Triggers Were Written for a Different Book

The 2026-1 bonds use an indemnity trigger, tied to Citizens' own losses rather than an industry index (Artemis). That choice matters in proportion to how far Citizens' exposure has moved from the Florida market average, and the gap has never been wider.

Policy count went from roughly 1,072,500 in June 2025 to just over 293,000 twelve months later. The 72.7% reduction did not shrink the book uniformly. Depopulation took what takeout carriers wanted, leaving the highest-value coastal exposures behind.

An industry-loss trigger pays when total Florida market losses cross a threshold. At 10% or more of the state's residential book, indemnity and industry loss stay broadly correlated. Under 3% of the market with a coastal-concentrated residual, they come apart in both directions: a storm hitting the specific counties where Citizens holds concentration produces indemnity losses outrunning the index payout, and a diffuse storm producing moderate industry losses can pay on a segment where Citizens now has little exposure.

The new placement handles this. The 2023, 2024 and 2025 vintage bonds carry their original trigger specifications, written when Citizens was a large representative insurer, and they cover roughly 54% of the tower. Mapping trigger type against the current exposure distribution for each seasoned series is the analysis the depopulation created and the renewal did not resolve, and it is a live problem for any cedant running a multi-vintage bond program through a book that changed shape underneath it.

Further Reading

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