U.S. primary insurance carrier group FedNat Holding Company has reported elevated catastrophe losses from second-quarter severe weather events, which it expects to cost it $48.3 million pre-tax and after reinsurance recoveries made.
FedNat’s pre-results announcement that Q2 2020 severe weather losses would be elevated comes on the heels of numerous other carriers all hit by higher than expected impacts in the last quarter in the United States.
These included Heritage, The Hanover, Arch Capital, Travelers, W. R. Berkley, Universal, Chubb, United, Cincinnati Financial and Selective Insurance Group, The Hartford and CNA, all of which reported catastrophe losses above analyst expectation for Q2 2020.
FedNat explained Friday that catastrophe losses from Q2 2020 are expected to reduce its pre-tax income reported by $48.3 million, net of all recoveries, including reinsurance.
Severe weather events drove the impacts, with Florida driving the most costs at $21.5 million, followed by Texas at $14.8 million, Louisiana at $11.3 million and other states at $0.7 million.
In addition, FedNat reported that it expects to report more adverse development, amounting to $7.5 million, pre-tax, strengthening of reserves from prior years, largely from the 2019 accident year in the Florida homeowners line of business.
The insurer also explained that it continues to file for rate increases, to try to cover the increased costs of claims activity and reinsurance.
In fact, FedNat is also applying for an additional 5.6% statewide-average Florida increase related to the cost of catastrophe reinsurance, which shows just how the firming reinsurance market is affecting carriers.
In relation to this, FedNat said it is now restricting new business throughout Florida during the wind season and until its rates can more accurately reflect its increased claims costs.
At the June renewals FedNat secured around $1.9 billion of reinsurance protection for its subsidiaries, adding additional aggregate protection which is the kind of coverage specifically designed to help with these kind of severe weather losses.