Assurant shrinks reinsurance slightly, but lowers retention & extends protection

U.S. specialty insurance group Assurant has completed its 2018 catastrophe reinsurance program, securing a $1.3 billion tower of protection across its book, which is slightly less than the prior year, but does feature an extension of coverage for the Caribbean and a lower retention in the United States.

Assurant was hit by the catastrophe losses during 2017, particularly the hurricanes, and its reinsurance program assisted the firm in maintaining its financial strength during the period.

“In 2017, our catastrophe reinsurance program proved strong and resilient, absorbing over $600 million in total gross losses, and more importantly Assurant was able to support policyholders during their time of need,” explained Michael P. Campbell, President, Assurant Global Home.

For 2018 the firm has purchased a $1.3 billion property catastrophe reinsurance tower, which the firm says will protect 2.9 million homeowner and renters policyholder clients against severe weather events and other hazards.

In 2017 the firm bought a $1.36 billion property catastrophe reinsurance program, but while the new program has a little less total coverage, in terms of where it exhausts, it provides more holistic coverage across the Assurant enterprise as the insurers retention has come down and it has added more coverage for the Caribbean.

Campbell commented, “This year, we’ve secured comprehensive catastrophe coverage with attractive terms and conditions due to our risk management expertise and strong relationships with our reinsurance partners. Assurant is not only dedicated to providing protection to our policyholders but also to our shareholders, as we gradually reduce our overall net loss retention, in conjunction with our declining exposure, over time.”

The company said that its 2018 reinsurance premiums paid for the program are estimated to be $121 million, down slightly from $126 million in 2017.

Assurant said the reduction is mainly due to its declining catastrophe exposure within its lender-placed insurance offering. But given the extended Caribbean coverage and the reduced retention in the U.S., it seems Assurant has secured a good deal with this renewal at relatively flat, or even reduced, pricing.

The main U.S. catastrophe reinsurance tower provides $985 million of coverage in excess of a $120 million retention for 2018, compared to $1.03 billion of coverage in excess of a $125 million retention in the prior year.

Multi-year reinsurance covers 32% of the $855 million layers in excess of $240 million, for the U.S. program, which is more of the renewal being secured on a multi-year basis than the prior year. All layers allow for one automatic reinstatement and include a cascading feature offering multi-event protection as well.

As Assurant has expanded internationally and perhaps also following the impact of last year’s hurricanes, the Caribbean protection provides $162.5 million of reinsurance in excess of a $17.5 million retention, and Latin American protection of up to $183.5 million in excess of a $4.5 million retention. This is an extension of 2017’s reinsurance that will renew on September 1st 2018.

The reinsurance program has been placed with more than 40 reinsurers that are all rated A- or better by A.M. Best, Assurant said.

We’re told there is third-party capital backing the program, through fronted and rated arrangements or other vehicles.

With the lower retention and broader Caribbean coverage, Assurant would likely retaine fewer of its losses from a repeat of last year’s hurricane season, providing greater protection for its shareholders and policyholders as well.

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