Heritage Insurance Holdings, Inc.’s insurance subsidiaries, Heritage Property & Casualty Insurance Company (Heritage P&C) and Zephyr Insurance Company (Zephyr), have completed their respective 2017-2018 reinsurance programmes at a reduced cost and under improved terms.
The programmes are incorporated into one reinsurance structure and includes traditional reinsurance, collateralized reinsurance, coverage by the Florida Hurricane Catastrophe Fund (FHCF), and also catastrophe bond transactions issued via Citrus Re.
The 2017-2018 programme provides Heritage with first event reinsurance protection for catastrophic losses of up to $1.75 billion in the state of Florida, and up to $731 million in Hawaii, and provides multiple event cover up to $2.62 billion.
According to the firm, the above limits exceed the requirements set by Heritage’s rating agency, Demotech, the Florida Office of Insurance Regulation, and the Hawaii Insurance Division.
Chairman and Chief Executive Officer (CEO) of Heritage, Bruce Lucas, said; “Our 2017 reinsurance treaty is a significant improvement over the 2016 treaty. We have reduced catastrophe reinsurance costs by over $20 million, or 8.3%, while improving treaty terms and conditions. Notably, our first event retention was reduced from $40 million to $20 million and our ground up retention for second event coverage is $16 million.
“We continue to minimize our reliance on state government sponsored reinsurance and maintained our participation in the FHCF at 45%. Our new program was placed on a cascading basis which provides greater horizontal protection in a multiple small events scenario and features additional coverage enhancements. In addition, Heritage expanded its use of multi-year, fully collateralized catastrophe bonds and has $687.5 million in catastrophe bond coverage today.”
The net cost of the firm’s 2017-2018 reinsurance placement is an estimated $223 million, with the estimated cost for per risk and facultative protection anticipated to be a further $7 million.
According to Heritage, the main drivers of the decreased cost when compared with the previous year includes “proactive exposure management” and “significantly improved pricing.”