HCI expects up to $300m hurricane Irma loss, reinsurers take majority

Florida focused primary insurance group HCI (Homeowners Choice) has revealed that it expects its losses from hurricane Irma will run into the hundreds of millions, but the firms reinsurance arrangements will take the bulk of its exposure from the storm.

HCI Group said that its principal operating subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., estimates a loss related to Hurricane Irma in the range of $100 to $300 million. With a retention of just $16 million on its reinsurance program the majority of the claims will fall to private reinsurers.

As well as reinsurance recoveries its expected that hurricane Irma will trigger the loss of accrued benefits and deferrals clauses under retrospective provisions in some of its arrangements with reinsurance partners.

HCI Group’s reinsurance panel includes such names as Endurance (now Sompo International), MS Amlin AG, AXIS Specialty, Renaissance Re, Chubb Tempest Re, Arch Re, Everest Re, a number of Lloyd’s syndicates and Berkshire Hathaway subsidiary National Liability & Fire Insurance Company.

Of those names, some could be fronting for their third-party capital units and affiliated ILS fund managers.

We’re told their may be some other collateralized players (ILS funds) participating directly in the program, but which HCI has never disclosed.

HCI’s reinsurance program provides for up to $968 million of catastrophe coverage for a single event in the 2017-18 year and the program cost the company around $113 million.

Some of the company’s insurance is through affiliate Claddaugh Casualty Insurance Company Ltd., which fully collateralized its participation in the Homeowners Choice reinsurance program. Claddaugh is expecting a total loss of $34 million from hurricane Irma, the full extent of the coverage it provided to Homeowners Choice.

“Our thoughts go out to all who have been affected by this hurricane,” commented Paresh Patel, HCI’s chairman and chief executive officer. “Our focus at this time is on our policyholders and ensuring their claims are handled quickly and efficiently. We have ample resources, including reinsurance recoveries and cash, to meet our obligations to policyholders.”

Reinsurance capital will pay the majority of HCI Group’s hurricane Irma claims, as it is expected to do for most other Floridian primary insurers.