FedNat says Q3 losses won’t trigger reinsurance program

U.S. primary insurance group FedNat Holding Company said that its third-quarter 2019 catastrophe losses are unlikely to trigger any reinsurance support for it. This despite the fact the company reduced its retentions for the current calendar year.

FedNat said that its Q3 2019 catastrophe losses are expected to reduce its pre-tax income by $7 million for the quarter.

The insurers gross catastrophe losses are pegged at $11 million, including $8 million from non-Florida property underwriting business, but the non-Florida component is subject to a 50% profit-share with a non-affiliated managing general underwriter that writes FedNat’s property business outside of Florida.

The catastrophe events that drove these losses for FedNat are hurricane Dorian, hurricane Barry and tropical storm Imelda, which drove the most significant impacts to it across South Carolina, Florida, Louisiana and Texas during the third quarter of the year.

FedNat does not expect its reinsurance tower to support its paying of these claims, with no single loss event expected to breach its $20 million retention for Florida and non-Florida business. None of the Q3 catastrophe events are expected to reach that level of gross loss for the insurer and in addition the company does not expect that its subsidiary Monarch National Insurance Company’s $2 million retention will be breached in Florida.

This despite the company having acquired a new reinsurance treaty for 2019 specifically to reduce its retention level.

Having secured a $1.84 billion reinsurance program at the mid-year 2019 renewals, FedNat then topped it up with a further layer of protection specifically designed to reduce its second and third event retentions.

But the catastrophes of 2019 have not been severe enough and the hurricane season, while relatively active now in terms of storm formation has not been particularly impactful to the U.S. insurance industry so far.

So while a dent to its results of $7 million is expected, FedNat’s reinsurers and the third-party capital providers also backing it will not face any impacts to their allocations to its reinsurance program it seems.