Heritage CEO says hurricane Irma gross loss closing on $800m

Florida headquartered, nationally expanding U.S. property casualty insurer Heritage Insurance Holdings, Inc.has estimated that its gross losses from last year’s hurricane Irma now stand at up to $800 million, suggesting greater impacts to the firms Citrus Re catastrophe bonds.

Initially after hurricane Irma, Heritage had reported a gross loss from the storm’s impacts in Florida of $388 million, back in early November 2017.

That figure has steadily risen, aligned with the industry wide loss experience from Irma, and now the firm’s CEO Bruce Lucas said last Friday during the firms Q2 earnings call that the Heritage gross loss estimate for hurricane Irma has risen to between $700 million and $800 million.

The catastrophe bond market and its ILS investors has been aware since late 2017 of the growing erosion of Heritage’s Citrus Re cat bond backed reinsurance coverage, with a significant chunk of the firms cat bonds now expected to pay out to some degree.

At the moment it seems that the same four Citrus Re cat bond tranches remain ready to pay out some level of losses, but that the losses may be eating higher into that tower than had previously been thought.

The overall erosion of the Citrus Re catastrophe bonds is anticipated to be somewhere between $150 million and $200 million of investor principal still, although the exact amounts attributed to each of the at-risk Citrus Re tranches remains less clear.

The Citrus Re 2015-1 cat bond is facing losses to its $97.5 million Class B tranche and $30 million Class C tranche of notes, along with more losses faced by the $100 million Class E-50 tranche from Heritage’s Citrus Re 2016-1 deal and the $35 million Citrus Re 2017-2 cat bond.

Time is still being allowed for ongoing loss development due to the impacts of hurricane Irma, with maturity for the 2015-1 notes extended far out to April 9th 2020.

In just these four tranches of notes Heritage has $262.5 million of its catastrophe bond backed reinsurance available and at the moment it seems like somewhere north of $150 million will be recovered from the investors backing these notes.

But it could take some time before the final bill is understood, especially as the maturity extension for the 2015-1 tranches brings those Citrus bonds into line with the 2017-2 deal, meaning we may not know the full extent of these Heritage linked cat bond losses for more than a year.

Details of many cat bond defaults and those facing potential losses can be found in our Deal Directory here.