FedNat reports $33m storm Uri exposure, cedes $19.4m to quota share

FedNat Holding Company, the U.S. primary insurance carrier group, has detailed the impact of February’s winter storm Uri and its other first-quarter 2021 catastrophe losses, as well as some of the reinsurance adjustments made to help it manage the hit to its balance-sheet.

FedNat said that overall its first-quarter 2021 catastrophe losses are expected to reduce its first quarter net income by approximately $14.5 million, after all reinsurance recoveries have been accounted for.

The insurer said that its aggregate reinsurance retention for winter storm Uri is roughly $23 million, on top of which it has a co-participation of nearly $18 million in excess of $61 million of losses, which came from the portion of its reinsurance program that does not have a cascading feature, allowing unused limit to drop down for subsequent events.

This co-participation has driven roughly $8 million of reinstatement premiums triggered by winter storm Uri, which FedNat said it will book as ceded premium over the period from the mid-February date of Uri through June 30th 2021.

With this reinsurance in mind, FedNat said its total exposure to policyholder claims from Uri is therefore estimated to be $33 million.

But the company has also ceded around $19.4 million of net retained Uri losses to Anchor Re, the SageSure owned quota share reinsurance structure, lowering FedNat’s estimated total net impact from Uri to approximately $13.7 million.

Other catastrophe events during the first-quarter have driven an additional $4.6 million impact, net of reinsurance recoveries, FedNat said.

FedNat also updated on the non-Florida quota share reinsurance arrangement it has in place with Anchor Re, the reinsurance structure of MGU SageSure, with which FedNat has a partnership arrangement in place.

The existing 80% quota-share reinsurance treaty was commuted effective end of January and then entered into a new one, on an in-force and renewal basis to run through to Feb 28th 2022.

This renewed quota share reinsurance arrangement features a limit on the overall net loss that Anchor Re can assume from FedNat during the treaty term.

FedNat ceded Anchor Re’s share of its net losses from winter storm Uri, on FedNat’s non-Florida book of business into this new quota share, though this cession was lowered by $1.5 million because the treaty was capped with the new net loss limit, the insurer said.

The insurer estimates that the new quota share has the capacity for FedNat to cede roughly $36 million of catastrophe losses over the full treaty term, but around $21.8 million of catastrophe losses have already been ceded during the first quarter of 2021, largely from winter storm Uri.

FedNat has also highlighted that it raised some $38.1 million of additional capital, from two separate raisings recently.

Adding that the strategic review it has been undergoing continues, trying to identify ways to enhance shareholder value.