Universal to cede most Q3 & hurricane Michael losses to reinsurance & ILS

Floridian headquartered primary insurer Universal Insurance Holdings is set to pass around $315 million of its losses from hurricane Michael to its reinsurance panel, which includes a healthy amount of collateralized protection from ILS funds and other providers.

Universal has always been a heavy user of collateralized capacity and once again hurricane Michael will see the firm passing the majority of its loss onto its protection panel.

Yesterday, Universal announced that it expects to experience gross losses and loss adjustment expenses of between $300 million and $350 million from hurricane Michael, which it said would leave it with net pre-tax losses and loss adjustment expenses of $35 million, so with its reinsurance panel taking everything above the retained amount.

With just a $35 million per-event retention, Universal is very well protected against these types of events that do not blow through the top of its reinsurance tower.

In addition, Universal also noted that it could benefit from some reinsurance support in other states as well, given hurricane Michael’s damage was wider than just in Florida.

The insurer said that if there are any additional reinsurance recoveries from its Non-Florida reinsurance program it could effectively reduce the retained amount even further.

Hence, Universal’s reinsurance panel could actually take more than the $315 million, if the insurers losses from hurricane Michael come out at the top-end of its estimate in Florida and it suffers additional losses in other states to trigger more reinsurance support.

Additionally, Universal also said that it expects to pass on some losses from other events to its reinsurers, including the majority of its hurricane Florence loss, which it says would be between $35 million and $45 million gross, but only around $5 million net.

Meanwhile, Tropical Storm Gordon which hit the U.S. Gulf Coast on September 4th 2018 is only expected to result in both gross and net impacts of $2.5 million.

Universal Chairman and Chief Executive Officer Sean P. Downes said, “We are thankful that our dedicated staff, disaster preparedness planning and conservative reinsurance program placed with strong reinsurance partners helped to limit the overall financial impact of these events.  We remain committed to fully supporting our policyholders in this time of need.”

Universal has $3 billion of reinsurance coverage and additional multi-year protection for 2018, in a program that includes a number of ILS funds, including the largest insurance-linked securities (ILS) fund investment manager Nephila Capital and other collateralized reinsurance players.