AmTrust Financial Services, Inc. has entered into a loss development reinsurance agreement with Premia Holdings Ltd. subsidiary, Premia Reinsurance Ltd., effective June 30th, 2017.
The agreement provides AmTrust with adverse net loss reserve development reinsurance protection of up to $400 million, in excess of stated net loss reserves of roughly $6.59 billion, as of March 31st, 2017 – providing coverage for exposures through April 1st, 2017.
A statement explains that the reinsurance arrangement offers as much as $1.025 billion of coverage for adverse net loss reserve development, which attaches when losses surpass roughly $5.96 billion of net loss reserves, and extends $400 million in coverage in excess of the carried loss reserves of approximately $6.59 billion, up to roughly $6.99 billion.
Barry Zyskind, Chairman and Chief Executive Officer (CEO) of AmTrust, said; “By entering into a reinsurance agreement, we are providing confidence to all of our stakeholders that we are well insulated from any potential reserve volatility in the future.
“We are committed to acting in the long-term interests of the Company and our shareholders, supporting opportunities for growth and success across our global operations and continuing to be a strong, stable partner for our brokers, agents, and policyholders.”
The consideration paid to Premia totals roughly $675 million, $50 million of which, explains AmTrust, is for a premium payment for the protection above the carried loss reserves of $6.59 billion. The firm will also experience an expense liability of a reported $11 million, and a one-off non-operating pre-tax charge to net income of roughly $61 million, which the firm will account for in the second-quarter of 2017.
Adam Karkowsky, Executive Vice President (EVP) and Chief Financial Officer (CFO), AmTrust, added; “This agreement supports our goal of reducing exposure to volatility and creating more certainty and confidence in our future financial performance. We are taking a thoughtful, conservative approach to the ongoing management of our balance sheet, consistent with that of property and casualty insurance providers of our size, scale and capacity.”