Reinsurance reduces Universal’s hurricane Irma loss to $37m

by Artemis on November 9, 2017

Florida headquartered primary insurer Universal Insurance Holdings has reported just a $37 million net loss from hurricane Irma’s impact on its home state, as its reinsurance providers took somewhere north of $400 million of its losses, some of which will have falled to ILS funds and collateralized sources.

Universal previously reported that its expected to claim back up to $415 million of its hurricane Irma losses from its reinsurance providers, meaning that its reinsurers and participating ILS funds would help it keep its net loss to just $35 million.

In reporting its third-quarter 2017 results yesterday, Universal reported reinsurance recoverables of approximately $412 million, up from just $2.7 million at the end of the second-quarter, so the majority of this increase will be the firm’s hurricane Irma reinsurance recovery, so just under $410 million.

With its net loss from hurricane Irma reported as just $37 million, it appears that overall Universal’s gross Irma loss is likely somewhere slightly under $450 million.

Despite the impact of hurricane Irma, Universal has managed to report a small profit for the third-quarter, something that clearly wouldn’t have been possible without the heavy use of reinsurance capital to absorb its hurricane losses.

The company acknowledged this, saying that its balance-sheet is, “Well protected by a comprehensive reinsurance program placed with strong reinsurance partners that helped to limit the overall financial impact of the devastating catastrophic events that took place during the third quarter.”

By the end of the third-quarter Universal had already received a significant chunk of its reinsurance payout as well, demonstrating the speed with which both reinsurers and ILS or collateralized players have been making payouts to their ceding clients.

Universal said that its cash and cash equivalents on its balance-sheet increased by $120.7 million during Q3 2017, largely from payments received from reinsurers for hurricane Irma claims.

Were it not for the reinsurance provisions that primary insurers like Universal had in place, hurricane Irma could have wiped out their businesses.

It’s clear from looking at the percentage of losses ceded to reinsurance versus retained, that the business models of the Florida primary property specialists would be untenable without the global reinsurance and ILS market’s support.

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