FedNat Holding Company estimates that its aggregate gross losses from Hurricane Michael will be approximately $275 million, of which it will retain just $23 million, with the remainder being passed on to its reinsurers.
The firm has a combined reinsurance program for its subsidiaries FedNat Insurance Company and Monarch National Insurance Company, which came into effect on July 1st, 2018.
The combined reinsurance program provides cover for both Florida and non-Florida exposures, affording both carriers roughly $1.8 billion of aggregate coverage with a maximum single event coverage of approximately $1.3 billion.
For Florida, FedNat’s single catastrophe event pre-tax retention is $20 million, while Monarch’s is $3 million. Currently, and based on preliminary post-landfall catastrophe model estimates, FedNat Holding Company estimates that its gross losses from Michael will be roughly $275 million.
FedNat Insurance states that its losses, in both Florida and non-Florida (which includes its $4 million hit from Hurricane Florence) exposures, net of reinsurance, should not exceed its $20 million first event pre-tax retention.
While Monarch feels that its losses, net of reinsurance, should not exceed its $3 million first event pre-tax retention.
“Given the limited non-Florida expected aggregate gross losses as a result of Hurricane Michael, the Company does not expect any recoveries from its non-Florida property catastrophe excess of loss coverage, which has a first event retention of $15 million, but any non-Florida aggregate gross losses will be included in the core reinsurance program described above.
“Furthermore, the impact on FedNat of any non-Florida net losses from Hurricane Michael will be reduced as a result of the profit sharing agreement that FedNat has with the nonaffiliated managing general underwriter that writes our non-Florida property business,” explained FedNat.
