Florida based primary insurer FedNat has detailed the terms of its 2021-2022 catastrophe reinsurance renewals, which saw the firm expand its program despite the impact of “more restrictive terms” on the availability of some coverages.
Overall, FedNat secured $1.41 billion of single event reinsurance coverage in excess of up to a $18.25 million pre-tax retention for certain catastrophic losses, including hurricanes, and aggregate coverage up to $2.25 billion, at an approximate total cost of $287.7 million.
Additionally, due to non-Florida exposures becoming a larger portion of its overall book of business, FedNat decided to separate its program into two reinsurance towers this year, splitting the costs into a $204.3 million ‘Primary Tower’ and an $83.4 million ‘FNIC SageSure Tower.’
The first tower includes all exposures for FNIC Florida, MIC in all states and MNIC and includes ground up first event limit protection up to approximately $982 million, subject to a maximum first-event retention of $10 million.
Meanwhile, the second tower provides ground up first event limit up to $450 million for all FNIC’s non-Florida business produced by its managing general underwriter partner, subject to a first-event retention of $8.25 million.
The $18.25 million combined towers maximum retention is a reduction in the first event retention of approximately 41% compared to up to $31 million in last year’s program, and the combination of these separate towers provides the Company with an increase in aggregate catastrophe reinsurance protection of approximately $333 million compared to the previous treaty year original purchase.
More specifically, the Program includes up to approximately $2.25 billion in aggregate reinsurance across all states that FedNat operates across, including $504 million of reinsurance provided by the Florida Hurricane Catastrophe Fund (FHCF).
Up to approximately $972 million is available for a first event within Florida, including $468 million of private coverage plus the FHCF coverage, and up to $910 million of coverage is available for a first event outside of Florida, including the $468 million of private coverage from the Primary Tower, which is available to cover catastrophe losses in MIC’s book of business located in Louisiana and Texas.
Additionally, the Program provides $831 million of private reinsurance across the combined towers for second and subsequent events, subject to individual retentions within each tower and the aggregate limit.
FedNat observed that the reinsurance market has continued to see hardening price trends this year due to a number of factors, including the elevated number of catastrophic events impacting US coastal areas in recent years.
These factors have resulted in “more restrictive terms” at renewal, the insurer said, with the change in terms in particular affecting the availability of cascading coverage, and limiting the open market capacity available for lower layer attachment points on an ‘all perils’ basis.
The 2021-2022 program is expected to result in a ceded earned premium to gross earned premium ratio of 40.4%, which is a decrease of approximately 3.3 points from the prior treaty year.
FedNat is continuing to target an overall decrease in its policy count and total insured value both within and outside Florida, with gross written premiums remaining fairly level over the past 12 months and projected to continue as such over the next year due to recent rate increases.