U.S. primary insurance group FedNat Holding Company has boosted its 2019-20 reinsurance program with a new treaty layer that reduces the firms second and third event retention of catastrophe losses.
FedNat had renewed its reinsurance for the 2019-20 season at the July renewals, securing a $1.84 billion program and saying that synergies within its expanded operating platform were helping its reinsurance purchases.
FedNat said that its growing diversification and expansion into new U.S. states were driving some reinsurance synergies for the firm this year, something that is now also evident in a top-up to the program from a new layer secured after the renewal.
FedNat has purchased an additional layer of reinsurance with the specific purpose of lowering its retention for second and third catastrophe loss events.
The additional layer of protection will sit within FedNat’s 2019-20 excess of loss reinsurance program and the holding company said that the result of the added layer lower-down in the tower will mean that its subsidiaries FedNat Insurance Company and Monarch National Insurance Company will, on a combined basis, only face second and third event retentions of $10 million per event, down from $22 million prior to this top-up to the program.
FedNat said it had paid $3 million for this underlying layer of reinsurance coverage, which certainly seems reasonable value if the company faces multiple catastrophe events this year, as the reduction in retention will make a significant difference to the firms earnings should that happen.
FedNat has also announced that it received regulatory approval to complete its pending acquisition of the homeowners insurance operations of 1347 Property Insurance Holdings, Inc., which includes the Maison Insurance Company, Maison Managers, Inc., and ClaimCor LLC units.
Now that the approval has been received, FedNat said that it hopes to close the acquisition as soon after November 30th 2019 as practical, which is the end of the 2019 hurricane season.
Once FedNat brings the Maison insurance operations into its business structure as well, further reinsurance synergies should be possible to drive greater efficiencies across the business.
As FedNat’s reinsurance program grows, there could be opportunities for the catastrophe bond market to take a share in years to come as well. While the significant collateralized and ILS fund market participation is bound to continue and grow as well.