Homeowners Choice Property & Casualty Insurance Company, Inc., an HCI Group wholly owned subsidiary, has secured its 2017 reinsurance renewal at what the insurer explained as “improved coverage terms and conditions”, spending a similar amount to last year.
The reinsurance program for the coming year, which includes a mix of traditional and fully-collateralized coverage, provides Homeowners Choice with protection for a first event up to a loss of $968 million, which it sees as covering a probable maximum loss resulting from a 1 in 173-year event, as well as second and subsequent event coverage up to an $816 million loss.
That’s a total reinsurance limit for all event occurrences up to $1.784 billion. The first event coverage is a little lower than last year’s $972 million, but the overall program with better terms likely means the insurer is better prepared for the hurricane season, its main risk, than last year.
Reinsurers participating in the program included Endurance Specialty Insurance Ltd., MS Amlin AG, AXIS Specialty Limited, Renaissance Reinsurance Ltd., Chubb Tempest Reinsurance Ltd., Arch Reinsurance Ltd., Everest Reinsurance Company, a number of Lloyd’s of London syndicates and Berkshire Hathaway unit National Liability & Fire Insurance Company.
Additionally, some of the protection has been secured through HCI Group’s own captive reinsurer Claddaugh Casualty Insurance Company, which in turn entered into some retrocession agreements to protect that portion of the group exposure.
Paresh Patel, HCI’s CEO, said that the insurer expects reinsurance costs to come to approximately $113 million for the 2017-18year, similar to its 2016-2017 renewal costs.
“While it is difficult to compare reinsurance coverages year to year, we expect our reinsurance spend to be similar to last year while securing improved coverage terms and conditions,” commented Patel. “In addition, we reduced our risk retained through HCI’s reinsurance subsidiary, Claddaugh Casualty Insurance Company, Ltd. We believe our company and our policyholders will remain well protected in the event of a catastrophe.”
HCI’s private reinsurance protection largely covers losses from hurricanes, tropical storms, tornadoes, floods, and other large catastrophe or weather loss events.
The insurer opted for a 45% participation rate in the Florida Hurricane Catastrophe Fund, which augments the private coverage. In the past insurers opted for higher percentages from the FHCF, but the efficient pricing in reinsurance and ILS markets has helped most reduce this down to a lower level in recent years.
Homeowners Choice’s retention is down to $16 million for a first event and $20 million for a second event, while total retention to HCI Group including through Claddaugh is around $50 million for a first event and $20 million for a second event.
A number of the reinsurance arrangements entered into by HCI are multi-year contracts, which allow for an adjustment of premiums in the event losses are minimal or zero in the first year. This can help to reduce cost over the term of the multi-year contracts and is likely an element of the improved terms cited.
How much of the program is fully-collateralized has not been revealed, nor has its source and whether it is from ILS funds. However, given the presence of the ILS market in key regions HCI operates in it is relatively safe to assume that some of the larger ILS and collateralized reinsurance markets have participated in the renewal.
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