Federated National Holding Company (FNHC) has completed its excess of loss catastrophe reinsurance programme for 2018-19, which will provide FNHC and its wholly-owned insurance subsidiaries, Federated National Insurance Company (FNIC) and Monarch National Insurance Company (MNIC), with $1.34 billion of reinsurance coverage in excess of $23 million retention for catastrophic losses.
The total cost of FNIC and MNIC’s combined 2018-19 reinsurance programmes is approximately $153 million, representing a saving of $27 million compared to their 2017-18 programmes, which is reflected in a 5.8 point decrease in their ceded premium to gross written premium ratio.
In Florida, FNHC’s underwriting and exposure management has led to an overall decrease in policy count, total insured value, and catastrophe modelled losses, while premiums written have remained flat, meaning the company has been able to maintain its reinsurance buying approach and level of protection with $243 million less single event reinsurance limit.
However, the company’s exposure outside of Florida has continued to increase in terms of policy count, total insured value, and written premium, which has benefitted FNHC’s overall reinsurance purchase by spreading their risk.
The $153 million figure includes $103.2 million for the private reinsurance for FNHC’s Florida exposure, including prepaid automatic premium reinstatement protection and $47.2 million payable to the Florida Hurricane Catastrophe Fund (“FHCF”).
The combination of private and FHCF reinsurance treaties will afford FNIC and MNIC approximately $1.81 billion of aggregate coverage with a maximum single event coverage of $1.34 billlion.
FNHC’s recent acquisition of the minority interests of MNIC has allowed the company to capitalise on efficiencies and scale by combining both FNIC and MNIC under a single programme.
The combined FNIC and MNIC private market excess of loss treaties will be effective from July 1, 2018, and will structure coverage into layers, utilising a cascading feature that drops down subsequent layers if the aggregate limit of a preceding layer is exhausted.
FNIC and MNIC will share the cost of the combined programme in proportion to their contribution to the total expected losses in each reinsurance layer, and each carrier’s reinsurance recoveries will be based on their contributing share of a given event’s total loss.
Additionally, FNIC’s non-Florida excess of loss reinsurance treaties afford a further $23 million of aggregate coverage, with first event coverage totalling $5 million and second event coverage totalling $18 million, costing FNIC approximately $2.6 million.
