Nephila features again as Universal completes reinsurance placement

by Artemis on June 6, 2017

Floridian insurer Universal Insurance Holdings has finalised its 2017-2018 reinsurance programme, with Nephila Capital once again being cited as a key participant. The insurer noted a continuation of the trend of increasing conservatism, a new contract that reduces its retention on certain coverage, and the expansion of its single Florida event reinsurance tower.

The completion of its 2017-2018 reinsurance programmes for its subsidiaries Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APPCIC), featured a range of reinsurance providers, with specialist catastrophe reinsurance and weather risk asset manager Nephila Capital again being cited as a leading participant.

“Another year of growing our business and capital, expanding our reinsurance coverage, maintaining the same Florida retention and further reducing our retention in other states, puts us in the strongest position we’ve ever been in as we enter the 2017 hurricane season,” said Jon W. Springer, President and Chief Risk Officer (CRO), Universal Insurance Holdings.

Effective June 1st, 2017, Universal’s 2017-2018 reinsurance placement saw the expansion of its top layer reinsurance coverage for a single Florida event to $2.65 billion from $2.4 billion last year, while maintaining the same $35 million catastrophe retention for a Florida loss and $5 million retention for a loss that includes states other than Florida.

“A $35 million loss would now represent just 10.5% of UPCIC’s statutory surplus as of March 31, 2017 and less than 9% of UVE’s stockholder’s equity as of March 31, 2017,” explained Springer.

The above underlines the continued availability of cheaper, or more efficient reinsurance capital in response to ongoing rate reductions at renewals, in 2017, which has carried on from previous renewal cycles in the highly competitive and softening landscape.

In recent times Universal has shown a focus on efficiency and conservatism, and it looks to have continued this trend for its 2017-2018 reinsurance placement.

“We are pleased with the completion of and outcome of the 2017-2018 reinsurance programs for both of our insurance companies. With this renewal, we have continued building on the recent trend of adding additional conservatism to our reinsurance programs without increasing the percentage of premium spent on reinsurance,” said Springer.

The overall cost of UPCIC’s reinsurance programme reached $155.5 million, and the insurer also secured reinstatement premium income protection at a cost of $25.7 million.

The placement also includes a new contract designed to reduce the firm’s second, third, and fourth event retention for a catastrophe loss that includes states outside of Florida to $1 million and, to further protect itself for future years, “UPCIC has also now successfully secured over $300 million of catastrophe capacity with contractually agreed limits that extend for two or more years,” explained Springer.

For the first layer, and immediately above its $35 million retention the insurer has $55 million of protection from third-party providers for up to four separate cat events for all states, with roughly 68% of the $55 million offering multi-year protection through May 31st, 2019.

Furthermore, the second layer and third layer of UPCIC’s reinsurance programme also features a portion of multi-year reinsurance protection.

UPCIC’s other states reinsurance programme cost a total $8.9 million, with the additional $1.85 million purchase of reinstatement premium protection. This placement specifically covers risks located outside the state of Florida and is intended to further reduce UPCIC’s $35 million net retention.

“APPCIC was also able to continue the conservatism trend by utilizing the same percentage of premium spent on reinsurance to add coverage for its new commercial lines business to all contracts and also maintain the same $2 million catastrophe retention,” said Springer.

APPCIC’s 2017-2018 reinsurance placement cost $1.88 million, with the additional $59,500 cost from the purchase of reinstatement premium protection. The programme has a net retention of $2 million for all losses per cat event up to a first event loss of $29.2 million.

As with last year it’s impossible to say how much of the 2017-2018 programmes is supported by collateralized capacity from third-party investors, but with Nephila being a key player it’s likely that increased efficiency was brought to the program by its and other ILS players use of efficient third-party reinsurance capital.

It’s also worth noting Universal’s additional layer of protection against catastrophe losses in the form of a parametric risk-linked contract, as it looks to protect itself against diminution in value due to catastrophe events.

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