FedNat CFO Ronald Jordan has said that filed rate increases are expected to largely offset the company’s higher catastrophe reinsurance costs in the second half of 2020.
Speaking alongside the release of FedNat’s Q2 results, Jordan explained that the firm would continue to restrict underwriting in its Florida book until rates are stronger with respect to higher claims and reinsurance costs.
The Florida based primary insurer posted a net loss of $21.5 million in the second quarter of 2020, after incurring $48.3 million of catastrophe costs during the period.
CEO Michael Braun noted that financial results also continue to be impacted by the property claims environment in Florida.
“While the number of AOB lawsuits continues to decline sharply, the powerful plaintiff’s bar in Florida remains diligent in finding avenues to bring litigation against insurers,” he said.
As such, FedNat will continue to limit its appetite to write new business in Florida until its premiums more accurately reflect these increased costs.
“We remain focused on growing profitably in our more attractive non-Florida homeowners markets and continuing to raise rates and restrict growth in Florida,” Jordan told investors on an earnings call.
FedNat’s 2021 reinsurance program provides $650 million of private reinsurance for non-Florida states, plus an additional $650 million of limit within Florida for $1.3 billion of first-event coverage in excess of $31 million, and an aggregate cover of $1.9 billion, at a total cost of $265 million.
The company also recently purchased additional reinsurance that lowers its retention to as low as $10 million for potential second and third events inside of Florida.
“We are pleased with the high-quality of the participants in our reinsurance tower and we continue to appreciate the strong support we receive from our reinsurance partners,” said Braun.
He continued: “We have clearly demonstrated that we have the discipline to limit growth in our Florida book until our approved rates are more in line with the higher claims and reinsurance costs that we continue to incur.”
