U.S. primary insurance firm Federated National Insurance (FedNat) has revealed a decrease in its loss from hurricane Matthew, compared to its initial estimate, meaning that reinsurance capital has taken a smaller share than it had first assumed.
Initially, FedNat had estimated aggregate gross liabilities from hurricane Matthew of $77.5 million. At the time of that announcement the insurer believed that it could pass on a significant proportion of those losses to its reinsurance panel, which includes some fully collateralized arrangements.
However in the insurers results announced FedNat has announced its gross hurricane Matthew loss at $47 million across Florida and South Carolina, and after using its reinsurance cover only expects to retain net loss of $21.4 million.
The retained loss consists of its $18.45 million excess-of-loss property catastrophe reinsurance program retention, and $2.3 million due to a reversal of the profit-sharing balance on its 10% Florida-only property quota share reinsurance, which had previously been recognised as income at the insurer.
The Florida only quota-share reinsurance arrangement takes 10% of losses from the ground-up, so it’s safe to assume that reinsurers on this layer took a share of FedNat’s losses as well, but it does not reduce the retained level of loss on the excess-of-loss contract it seems.
The outcome is that reinsurers took less of the loss than had been expected initially, a scenario that has likely played out in many insurers programs as the final claims tally from hurricane Matthew came in below initial expectations.
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.