Universal expects mid-year reinsurance renewal pricing to be lower

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The mid-year reinsurance renewal at June 1st is expected to yield pricing that is lower than last year for Florida headquartered primary insurance company Universal Insurance Holdings, which expects to be able to keep its retention static, while buying more coverage at comparable or lower rates.

The insurer has just passed on an additional $50 million of claims from hurricane Irma to its reinsurers, as new claims from the storm continue to be filed. But Universal expects the reinsurance market to be competitive at June 1st, helping it to ensure it isn’t paying anymore for its program than it did in 2017.

CFO Jon Springer said that the insurer has already met with met the majority of its reinsurance capital partners, in order to discuss the firms hurricane Irma experiences and to go through its protection needs for the upcoming June 1 reinsurance renewal.

He said that it is evident that reinsurance capital providers will differentiate their terms and pricing for Floridian primary companies, favouring those that have the better hurricane Irma claims experience and that have invested in their claims teams.

Springer also noted that, “Hurricane Irma was a devastating event for many. But from a professional reinsurer perspective, it was exactly the type of event that is modeled for, priced accordingly and expected to occur.”

So reinsurers will look favourably on those companies that have a lower percentage of claims reopened, that have settled claims quicker and that have teams of people who visit claimants very quickly after filing has occurred.

Universal is only looking for a renewal of around 32% of its reinsurance coverage at June 1st 2018, given so much of its program is now multi-year in nature, or renewed at January 1st.

But the company is now in the market and said it has received and evaluated quotes from its lead reinsurance partners, hence is in the market with firm order terms right now for its all-States catastrophe tower for Universal Property & Casualty Insurance Company (UPCIC).

The response this mid-year 2018 renewal placement is getting has been impressive it seems, with Universal expecting to secure its reinsurance renewal at better rates than it saw in 2017.

The market has been hoping for rate increases at mid-year 2018, following on from rate increases in January and with Universal a largely Florida tower still, despite its expansion, if this program is evidence of broader renewal trends reinsurers may find themselves largely disappointed once again.

Springer said that he expects the renewal to be positive and for Universal to get keen pricing from its reinsurers.

“The 2018 renewal is shaping up to be a year where we’ll be keeping our catastrophe retention at the same level, buying catastrophe coverage to a higher level, and spending the same, or less as a percent of earned premium, to do so,” he said.

That would be a positive result for Universal, but sets the tone for reinsurers to expect not to be able to secure significant rate rises, even in loss affected areas, with differentiated pricing between ceding companies perhaps the best that they can hope for.

It’s not known what portion of the program could be from ILS funds and collateralized reinsurance players, but it is likely to be significant and the efficiency of ILS capital likely to have played a role in helping Universal secure a renewal at attractive rates once again.

Register now for our upcoming ILS conference, July 12th 2018, SingaporeILS Asia 2018

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