Primary insurance company loss estimates are now being announced, with the latest being Federated National Insurance (FedNat), which is set to call on its reinsurance panel, while Homeowners Choice Group (HCI) said the loss will not trigger reinsurance recoveries outside of HCI.
The first primary insurer to announce a loss estimate was Heritage, which said it expected that losses from hurricane Matthew would come in below $100m, with anything above a $40m retention falling within its reinsurance tower.
Now, Federated National has also confirmed that a portion of its losses from hurricane Matthew will fall to its reinsurance capital providers.
FedNat underwrites property insurance in both Florida and South Carolina, two of the U.S. states worst affected by hurricane Matthew. FedNat said that its aggregate gross liabilities are estimated at around $77 million, but that its retained losses, after calling on its reinsurance protection, should not exceed $18.45 million and could even be as low as $8 million.
That suggests FedNat will retain less than a quarter of its hurricane Matthew losses, with reinsurance capital absorbing the rest. The company notes that $75 million of the loss is from Florida, but that reinsurance arrangements in other states, where it has a separate reinsurance agreement to cover losses incurred outside of Florida, could reduce the retained losses to as low as $8 million.
FedNat’s main first-event reinsurance cover runs up to $1.58 billion, so these losses are really not significant for its panel which does include some ILS fund managers.
For reinsurance firms and any ILS funds that participate on a collateralised basis, it is the industry wide exposure that could aggregate towards something a little more meaningful, but individual insurer ceded losses are currently not coming in that high.
The company said that FedNat subsidiary Monarch National Insurance Company’s losses from hurricane Matthew are expected to be immaterial.
Meanwhile, Homeowners Choice Group, also an insurer with a big exposure in peak wind risk zones like Florida, revealed an estimation that its losses would fall below $50 million due to hurricane Matthew.
Unlike the other insurers, HCI Group said that its Matthew loss will not trigger reinsurance recoveries “from outside HCI Group.” However HCI may still call on reinsurance arrangements, some of which are third-party capital funded.
The reason for this is that HCI reinsures some of its lower down risk with Claddaugh Casualty Insurance Company, a captive reinsurance company subsidiary of HCI Group, Inc., that provides the firm with $40 million of cover in a first event.
Claddaugh then has a retrocession contract with Oxbridge Re, itself a fully-collateralised and investment oriented reinsurer, operating as a kind of sidecar reinsurance vehicle for HCI.
This means that ultimately HCI’s losses will likely be partly retained by the Group and partly paid through Claddaugh and Oxbridge Re, which could see some losses borne by Oxbridge Re’s investors.
Risk modelling firm Karen Clark & Company put the insurance industry loss from hurricane Matthew at $7 billion today, while CoreLogic suggested $4 billion to $6 billion earlier this week and RMS’ modelled scenarios suggested a U.S. insured loss somewhere from $2 billion to $8 billion.
Estimates do seem to be converging now around the $6 billion mark, but so far insurer estimates seem relatively low.
However we have yet to hear anything from the likes of Universal, Tower Hill, State Farm, Citizens, USAA, Progressive and United which are all in the top ten homeowners multi-peril writers in Florida, according to A.M. Best.
Additionally, commercial multi-peril underwriters American Coastal, Zurich, Nationwide, Liberty Mutual, Chubb, Tokio Marine, and QBE, would all be expected to take a hit from hurricane Matthew in Florida too.
In South Caroline the likes of State Farm, Allstate, USAA, Nationwide, Travelers, Liberty Mutual, AIG and the various farm bureau insurers are all expected to bear the brunt of the homeowners losses, while Hartford and Auto-Owners feature on the commercial side.
On A.M. Best’s rankings State Farm dominates North Carolina as well, alongside the likes of Nationwise, USAA, Allstate and other usual suspects.
The larger national companies are not likely to cede as large a proportion of their losses to reinsurance capital as the property specialists focused on wind exposed states, such as Heritage, FedNat and HCI.
Read our previous articles on hurricane Matthew:
Subscribe for free and receive weekly Artemis email updates
Sign up for our regular free email newsletter and ensure you never miss any of the news from Artemis.