Having now secured a much-needed investment and put its restructuring plan into action, Florida-focused property insurance company FedNat Holding Company has arranged reinsurance to support its remaining Texas policies that were written by its Maison Insurance Company subsidiary.
As we reported last week, FedNat announced the $15 million investment into its Monarch National Insurance Company subsidiary by investor Steve Hale’s company Hale Partnership, as well as the securing of catastrophe reinsurance by that carrier.
As part of the arrangement, the majority of FedNat’s Florida insurance policies were assumed by Monarch as well.
FedNat has implemented a restructuring plan, downsizing and refocusing its business onto the Florida property insurance market, as it sought to return to a sustainable shape so that it could secure the necessary reinsurance its portfolio needed and recover its rating.
Demotech had downgraded FedNat Insurance Company, after which the carrier group announced the restructuring plan and said that an investment into Monarch was coming.
FedNat then said that funds managed by Hale Partnership Capital Management LLC, a North Carolina based investment adviser, would inject $15 million of capital into Monarch, after which FedNat would also contribute additional capital to Monarch, to further enhance its surplus position.
That investment is now completed and the Steve Hale investment operation has become the majority owner of Monarch, while FedNat continues to have a minority stake in the insurer.
At the same time, the Florida policies held by FedNat’s in run-off Maison Insurance Company (Maison) subsidiary were cancelled effective June 29th 2022, and most of Maison’s non-Florida policies were also cancelled or expired.
However, there were around 7,650 Texas policies left over, that FedNat said last week will expire over the next nine months.
It’s now become apparent that these 7,650 Texas property insurance policies have now had catastrophe reinsurance purchased to support them through the US wind season, in a reinsurance deal effected using on of Aon’s White Rock branded structures.
White Rock USA Ltd., a Vermont domiciled captive, has been utilised to provide the reinsurance necessary to support the Texas property insurance business that Maison had written, covering it until the policies expire.
The reinsurance contract will provide Maison with catastrophic windstorm reinsurance protection against the Texas policies, providing $7.8 million of reinsurance limit above a $5 million retention.
White Rock USA Protected Cell 47 has been formed by HG Holdings, Inc., which is Steve Hale’s listed company, and through this reinsurance arrangement HG Holdings has capital at risk of $1.17 million.
However, it is Maison that will pay the White Rock cell the $6.63 million in reinsurance premiums to support the reinsurance contract.
Which funds the catastrophe exposure related to a major US storm impacting this Texas portfolio over the remainder of the policies terms, it seems, with the cell structure an efficient way to arrange the financing and reinsurance of this remaining Texas risk from the FedNat group of companies.