The first two smaller primary insurers to report on the impact of hurricane Harvey are both likely to claim on their reinsurance for help paying hurricane Harvey losses, reflecting one source of loss for traditional and alternative reinsurers.
The smaller to mid-sized specialist property insurers which are focused on areas of Texas and Louisiana where hurricane Harvey has caused storm surge, wind, hail, tornado and of course flood damage, are all likely to have small retentions and make greater use of reinsurance protection, than the large national insurance players.
1347 Property Insurance Holdings, Inc., a property and casualty insurance holding company that covers Louisiana and Texas through its wholly owned subsidiary, Maison Insurance Company, said today that it expects to retain just $5 million of its losses from hurricane Harvey and that reinsurance arrangements will take the rest.
“Based on our early analysis, we expect the gross losses to exceed the $5 million per occurrence retention of our catastrophe excess of loss reinsurance program, but be well within $195 million per occurrence limit. Therefore, the pre-tax losses arising from Hurricane Harvey incurred by the Company, net of reinsurance, are not expected to exceed $5 million,” the company explained.
So 1347 PIH expects to make a claim of up to $190 million from its reinsurance providers, some of which could be collateralized providers such as ILS funds.
Meanwhile, Hallmark Financial Services, Inc., a diversified specialty property/casualty insurer with a focus on Texas and its headquarters in Fort Worth, said that it would retain the first $3 million of losses under its catastrophe reinsurance program, before passing on the rest to its reinsurers.
Hallmark said it would also be responsible for a share of the reinstatement premiums under its program.
These are just the first two of the smaller, property focused insurers to make a statement on their exposures, but both make it clear by their very low retentions that the majority of their claims from hurricane Harvey are headed straight for their reinsurance counterparts.
Federated National has also said that it faces a maximum loss of $4 million, as it expects to use up its retention and eat into its reinsurance arrangements, given it underwrites homeowners risks in Texas and Louisiana.
The ILS fund market and collateralized reinsurance entities could pick up losses through some of the programs of these smaller, more regionally focused property insurers, with a number of ILS fund managers having a particular focus on regional programs, over the larger national insurance players.