Florida based primary insurer FedNat has reported that catastrophe weather losses experienced in the first-quarter of 2021 will lower its net income for the period by $14.5 million, after-tax and net of all reinsurance recoveries.
The majority of the company’s Q1 2021 catastrophe bill comes from the impacts of winter storm Uri in the U.S., notably in Texas.
FedNat had said previously that its aggregate reinsurance retention for Uri is roughly $23 million.
The firm also has a co-participation of roughly $18 million in excess of $61 million of losses, which resulted from the portion of its reinsurance arrangement that does not incorporate the cascading feature where unused limit drops down for subsequent events.
According to FedNat, this co-participation includes around $8 million of reinstatement premiums triggered by the impacts of Uri, which will be recognised as ceded premium.
Overall, the insurer’s total exposure to policyholder claims from Uri is estimated to stand at $33 million.
Of its net retained Uri losses, FedNat ceded approximately $19.4 million to Anchor Re, which brought down its Uri loss estimate further to around $13.7 million.
Other catastrophe losses in the quarter totalled approximately $4.6 million, net of reinsurance recoveries, for FedNat in 2021, taking its Q1 2021 pre-tax cat loss total to $18.3 million.
Of this total, around $15.2 million relates to losses in Texas, $2.9 million in Louisiana, and $0.2 million in Florida and other regions.
As announced back in February, FedNat entered into a new aggregate excess of loss reinsurance program on its Maison book of business, effective Jan 1st, 2021.
Excluding named storms, this program provides coverage of 65% of $15 million excess of $10 million with an $850,000 occurrence deductible, and a $4.15 million occurrence limit at an approximate annual cost of $2.3 million.
The impacts of Uri satisfied a portion of the annual aggregate retention subject to this new treaty, explains the insurer.
Following the damages caused by Uri in parts of the U.S., FedNat secured additional reinsurance limit of 50% of $70 million excess of $25 million and 100% of $15 million excess of $10 million, at an approximate cost of $13 million. FedNat reiterates that this layer of protection is for events occurring during this period for all carriers and all states, with a portion excluding named storms.
“In aggregate, supplemental catastrophe reinsurance purchases and reinstatement premium co-participations during the current catastrophe treaty year drove approximately $13.6 million of incremental ceded premium in the first quarter of 2021, as compared to the baseline cost of the Company’s catastrophe reinsurance program incepted on July 1, 2020,” explains FedNat.
Adding: “For the second quarter of 2021, the incremental ceded premium above the baseline cost is projected to be approximately $20.6 million.”
