Insurance holding company The National Security Group is expecting to be hit with $4 million pre-tax, net of reinsurance losses as a result of hurricane Michael.
Based on analysis of historical reporting patterns, preliminary post-event model output and assessment of early reports of claims to date, the group estimates its ultimate gross losses from Michael to be in the range of $10 million to $15 million.
However, any losses above the group’s $4 million retention are covered by catastrophe reinsurance to the extent of the upper limit of its $72 million catastrophe coverage.
Based on estimate of gross losses, the firm expects losses from Michael to remain well below the upper limits of its cat reinsurance coverage.
The group also purchases reinstatement premium protection which reinstates cat coverage for a second event that exceeds the $4 million per-event retention level.
Net of tax, Michael will reduce the group’s 2018 earnings by $3.160 million and will reduce earnings per share by $1.25.
The impact of the hurricane will be reflected in the firm’s Q4 results. To date, it has over 1,500 claims reported from this event with approximately 85% located in Georgia.
Michael made landfall in Florida last week as a Category 4 storm, with sustained wind speeds of up to 155mph, making it the strongest hurricane to hit the U.S since Andrew in 1992.
The group had policyholders in Alabama, Georgia and South Carolina exposed to hurricane or tropical storm force winds across 10 & 11 October.
While net losses from Michael will have a material impact on the group’s 2018 earnings, it does not expect the storm to adversely impact its capital position.
