FedNat expects agg reinsurance recovery for Delta, expands quota share

FedNat Holding Company, the U.S. primary insurance carrier group, has again said that it expects the latest hurricane to hit the United States will trigger a catastrophe reinsurance recovery for the firm, as losses from Delta are expected to exceed its aggregate retention.

FedNat estimates that aggregate gross losses it suffers from hurricane Delta will exceed its single-event aggregate reinsurance retention of $25 million.

The insurer expects that catastrophe reinsurance will help to reduce its net loss from hurricane Delta down to $10-15 million, pre-tax, from its non-Florida coverage and also the 50% quota-share reinsurance treaty in place on the book written by SageSure Insurance Managers LLC, its independent Managing General Underwriter partner.

FedNat had previously reported that its reinsurance programs had been triggered by hurricane Laura and also hurricane Sally.

Today, the company revealed that it expects third-quarter catastrophe losses, which include those two hurricanes, to reduce its earnings by around $29 million, after accounting for reinsurance recoveries and after tax.

Before tax, FedNat said that $25.7 million of its losses were from Florida, $16.6 million from Louisiana and $2.6 million from other states.

Without the reinsurance recoveries made, FedNat would have been looking at a far more impactful third-quarter and the way its program has responded will have made a significant difference for the insurance carrier this year.

The insurer has continued to firm up its reinsurance protection as well, adding additional quota share cover in recent weeks to further minimise the impact of catastrophe losses going forwards.

FedNat has increased the cession rate on its Florida homeowners quota-share reinsurance program for 2020-2021 from 10% to 20% on an in-force, new and renewal basis.

This program originally incepted on July 1st 2020, but already FedNat has negotiated an increase, likely in response to the heavy impacts it has suffered from the hurricane season.

The quota share for Florida homeowner business excludes named storms, but will protect FedNat against other storms and catastrophe losses affecting the state.

On top of this, FedNat said today that it wants to increase its reinsurance protection even further and “intends to explore additional quota-share reinsurance treaties in the coming months.”