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Fednat grows catastrophe reinsurance program at July renewals

2nd July 2019 - Author: Matt Sheehan

Florida-based FedNat Holding Company has announced the renewal of its catastrophe reinsurance program for 2019-2020, which includes a slight increase to its aggregate limit.

FedNat HoldingThe aggregate reinsurance limit was increased from $1.79 billion to $1.84 billion at the July 1 renewals, FedNat reported.

At the same time, the aggregate private market limit was increased roughly by $147 million due to less Florida Hurricane Catastrophe Fund (FHCF) protection from a smaller Florida book.

Additionally, the maximum single event coverage totaled approximately $1.28 billion.

The program applies to FedNat’s subsidiaries FedNat Insurance Company (FNIC), and Monarch National Insurance Company (Monarch), as well as Maison Insurance Company (Maison).

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FedNat does not yet own Maison, but it is the target of a previously announced acquisition, and remains subjects to regulatory approval.

Given the pending acquisition of Maison, FedNat and 1347 Property Insurance Holdings, Inc. (PIH) have agreed to combine FNIC, Monarch, and Maison under a single reinsurance program.

The coverage will run from July 1, 2019 to June 30, 2020 and includes $162.2 million of private market spend and $42.5 million of FHCF contribution, for a total program spend of $204.7 million.

FNIC also renewed its quota share treaty through June 30, 2020, which excludes named storms, for another 12 months at terms similar to those secured in the previous year.

“We continued to see strong support from our reinsurance partners throughout this year’s renewal process,” said Michael H. Braun, Chief Executive Officer (CEO) of FedNat.

“We appreciate the ongoing commitment from our long-term partners amidst an evolving view of their risk profile, and we welcome several new partners into this year’s program,” he added.

Based on policy count as of March 31, 2019, 18.3% of FedNat’s exposure is non-Florida, up from 13.4% at inception of last year’s program. With the pending Maison acquisition, non-Florida exposure would increase to 34.7% of the total.

FNIC and Monarch maintained their FHCF participation at 75% for the 2019 wind season and obtained similar private market protection for an additional 15%, while Maison purchased FHCF protection for 90% for the same period.

Additionally, FNIC maintained its retention at $20 million and Maison’s retention is $5 million, but Monarch lowered it retention from $3 million to $2 million.

FNIC also increased its non-Florida first event retention from $15 million to $20 million and maintained its second event retention of $2 million for hurricane-only events.

The company’s non-Florida retentions were reduced by 50% after taking into account the profit-sharing agreement between FNIC and its non-affiliated managing general underwriter.

FedNat specified that all layers of its reinsurance agreement are cascading and include prepaid automatic premium reinstatement protection.

“We have made significant progress over the past years to reduce our exposure to the Florida market and broadened our diversification in other coastal states throughout the Southeast, both organically and via our pending acquisition of Maison,” Braun continued.

“Maison’s homeowners line of business in Texas was recently approved for a 30.5% rate increase and we continue to prepare our integration efforts to incorporate Maison into FedNat’s operations at the appropriate time, subject to continued regulatory review,” he explained.

“Looking ahead, we believe that our enhanced reinsurance programs, the addition of Maison and the expected benefits of Assignment of Benefits reform in the Florida market will benefit our overall portfolio and strengthen our earnings profile.”

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