Reinsurance News

Universal renews reinsurance at higher cost with more capacity

1st June 2022 - Author: Matt Sheehan

Florida headquartered and expansive primary insurance company, Universal Insurance Holdings, has announced that it has successfully renewed its reinsurance coverage at a “modestly” higher cost.

universal-insurance-holdings-logoChanges to the program include more open market catastrophe capacity across all treaties and multiple events, as well as a reduction to the top end of one reinsurance tower.

The coverage was secured for Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APPCIC) at a total cost of $696 million.

This price reflects approximately 37.6% of estimated direct premiums earned for the 12-month treaty period, compared to 36.4% of estimated premiums at this time last year.

“We are pleased to announce the completion and outcome of the 2022-2023 reinsurance programs for both of our insurance companies,” said Matthew J. Palmieri, President of UPCIC. “Against a backdrop of wide ranging macro-economic pressures globally and an extremely challenging property insurance and reinsurance marketplace, particularly in the markets that we serve, we were able to secure the extensive reinsurance program we desired for the 2022 hurricane season. In fact, we were able to secure more capacity in future years, including the 2024 renewal.

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We appreciate our long-standing partners that have supported us for over a decade and we look forward to continuing to foster these specific key relationships as well as the new ones we established in this renewal cycle. As expected, our reinsurance costs have increased modestly over the 2021-2022 period, but remain in line with our expectations and give us the operational stability and coverage certainty we need to execute our plan well into the future.”

Included among Universal’s reinsurance partners at the latest June 1 renewal are Nephila Capital, RenaissanceRe, Munich Re, Chubb Tempest Re, Everest Re and Lloyd’s of London syndicates.

Universal’s Florida policies-in-force declined by 7% year-over-year as of first quarter 2022, while Florida premiums-in-force increased by 11%, as the company looks to optimize its spread of risk and improve rate adequacy.

UPCIC’s first event reinsurance tower has a top end of $3.16 billion, down 7% from last year, in line with the decline in Florida policies-in-force, and UPCIC purchased more open market capacity across all treaties for its expected risk count than ever before.

UPCIC’s first event tower now has $1.14 billion of limit that automatically reinstates to guarantee a certain level of protection in multi-event scenarios, including reinstatement premium protection for all private layers below the FHCF.

The unit’s all states retentions remain unchanged at $45 million for first and second events and $25 million for third and fourth events, and, for a first event only, Universal Insurance Holdings (UIH) provides UPCIC with layer one coverage, utilizing the same captive as the 2021-2022 treaty period.

To insulate future years, UPCIC has secured $383 million of multi-year catastrophe capacity below the Florida Hurricane Catastrophe Fund, with contractually agreed limits that extend coverage through the 2023 wind season, $277 million of which extends through the 2024 wind season.

UPCIC’s catastrophe bond, Cosaint Re Pte. Ltd, secured during the 2021-2022 renewal, continues to provide one limit of $150 million in this year’s program and it may also include the 2023 wind season, depending on loss activity this year.

APPCIC’s first event catastrophe retention for a Florida loss is $3.5 million on a consolidated basis, with a first event tower exhaustion point of $54.6 million. Similar to UPCIC, there are no co-participations in any layers and no accelerated deposit premium requirements.

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