Reinsurance News

United (UPC) shrinks cat reinsurance limit at renewal

20th June 2022 - Author: Matt Sheehan

Property and casualty insurance holding company United (UPC Insurance) has disclosed details of its catastrophe reinsurance program for 2022/23, which includes a significant decrease in the occurrence-based limit for its aggregate cover.

UPC purchased $2.524 billion of occurrence-based limit in the aggregate for its core cat program, representing a decrease of $407.0 million, or 13.9%, from the $2.931 billion of cascading aggregate limit purchased for its 2021/22 core catastrophe reinsurance program.

This protection covers its subsidiaries, American Coastal Insurance Company, Journey Insurance Company, Family Security Insurance Company, Inc. and United Property & Casualty Insurance Company, and applies to perils including earthquake and windstorms.

Coverage is for Florida, Louisiana, and Texas only given the renewal rights sale and 100% quota share reinsurance from HCI Group, Inc. for personal lines exposure in Georgia, North Carolina, and South Carolina

First and second event retention of $16.4 million per occurrence, an increase of $1.4 million or 9.3%, from the $15.0 million retention for a first and second event in the 2021/22 Core CAT program

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Notably, UPC also opted to move its core catastrophe reinsurance from a cascading aggregate structure in 2021/22 to an occurrence-based structure in 2022/23 with estimated first event limit of $1.929 billion and second event limit of $594.9 million.

Turning to the company’s quota share reinsurance program, UPC renewed at a 10.0% cession rate, which was a decrease of 5 points from the expiring cession rate of 15.0% with the existing reinsurer.

Combined with the 8.0% cession rate effective December 31, 2021, the total quota share cession rate for the 2022 wind season will be 18.0%

Homeowners insurance subsidiary Interboro Insurance Company also purchased $187.6 million of catastrophe reinsurance limit per occurrence, a decrease of $24.4 million or 11.5%, from the $212.0 million of limit per occurrence in 2021/22.

The total cost of UPC’s 2022/23 catastrophe excess of loss programs excluding potential reinstatement premium is approximately $374.7 million, a decrease of $36.4 million or 8.9%, from the 2021/22 catastrophe excess of loss reinsurance programs cost.

The total cost of the 2022/23 catastrophe excess of loss reinsurance programs is 32.7% of the March 31, 2022 in-force premium in the covered states, a slight decrease from 32.9% of the March 31, 2021 in-force premium for the 2021/22 catastrophe excess of loss reinsurance programs.

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