FedNat expands quota share, adds aggregate reinsurance, reports $23m Q4 cat losses

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FedNat Holding Company, the U.S. primary insurance carrier group, further expanded its reinsurance arrangements towards the end of the year, adding new quota share protection so it now benefits from 40% coverage through the middle of 2021.

FedNat logoThe insurer has also reported that its net catastrophe losses for the fourth-quarter will dent its results for the period by $23 million, largely thanks to the impacts of hurricanes.

FedNat has been growing its reinsurance protection over the last year, while also benefiting from it for some catastrophe protection as well.

For the fourth-quarter of 2020, FedNat said it expects to report $23 million of catastrophe losses, net of reinsurance recoveries and after-tax, with hurricanes Delta, Zeta and Eta the main drivers of the claims.

The majority of the claims were in the state of Louisiana which accounted for $18.2 million of the loss, followed by Florida with $11.1 million and Texas and Alabama with $1.8 million.

The company had previously said that hurricane Delta was likely to trigger a catastrophe reinsurance recovery, as losses from that storm were expected to exceed its aggregate retention.

FedNat has also announced new additions to its reinsurance cover, put in place at the end of 2020.

In particular, FedNat has expanded its Florida homeowners quota share reinsurance, which thanks to new arrangements entered into towards the end of 2020 will now cover 40% of its losses and profits through until the end of June 2021.

After that, half that quota share reinsurance cover will be up for renewal again.

The company has also added a new Aggregate Excess of Loss reinsurance program to protect its Maison book of business. It covers 65% of $15 million excess of $10 million, after an $850,000 occurrence deductible and a $4.15 million occurrence limit, and excluding named storms. FedNat said the approximate annual cost of this new aggregate reinsurance is $2.3 million.

Bolstering its reinsurance is not the only action being taken though.

FedNat is also filing for rate increases on its homeowners business, which it says is to “reflect the increased costs related to claims activity and reinsurance.”

In addition, FedNat is restricting new business in Florida, until it can charge rates it feels are commensurate with its loss and reinsurance costs.

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