National General Holdings Corp. has entered into individual two-year quota share reinsurance arrangements with a number of reinsurers, including Hannover Re, Munich Re and Everest Re, covering its auto and homeowners business lines.
The first two-year quota share reinsurance agreement concerns National General’s auto business, the Auto Quota Share Agreement, and sees the firm transfer 15% of its net liability under in-force auto policies at the effective date, and new and renewal policies issued during the two-year term of the arrangement, to reinsurance giant Hannover Re.
National General explains that under the arrangement it will receive a 31.2% provisional ceding commission on premiums that are ceded to the reinsurance companies through the life of the contract, which the firm says is “subject to a sliding scale adjustment to a maximum of 32.8% if the loss ratio for the reinsured business is 63.4% or less and a minimum of 29.6% if the loss ratio is 66.6% or higher.”
For the reinsurer, liability is capped at $5 million per risk, or $70 million per event. While the cession can be increased up to a maximum of 20%, depending on certain conditions.
“We are excited to partner with such a high quality group of reinsurers to support the growth we are experiencing in our auto and homeowners lines of business. It is rewarding to see the value that our reinsurance partners place on the business that we have built and on our underwriting sophistication.
“The new quota share agreements give us the capital flexibility to take advantage of the unprecedented opportunity we are experiencing in two of our key product lines,” said Barry Karfunkel, National General’s Chief Executive Officer (CEO).
The second agreement, the HO Quota Share Agreement, sees National General cede 29.6% of its net liability under homeowners policies, which includes lender placed property policies, that are in-force at the effective date, and also new and renewal policies issued during the two-year term to a number of reinsurers, led by Germany’s Munich Re, and reinsurer Everest Re.
Under this reinsurance agreement, National General will receive a 42.5% ceding commission on premiums ceded to the panel of reinsurance companies during the term of the contract. Again, the liability for the reinsurers is capped at $5 million per risk, or $70 million per event.
Both quote share reinsurance agreements are effective July 1st, 2017, and cover a two-year term, and were completed with a group of “highly rated unaffiliated third-party reinsurance providers.”