Direct-to-consumer and fast-growing insurtech company Kin Insurance has revealed that it ceded around 97% of its gross losses from hurricanes Ian and Nicole in 2022 to its reinsurance capital partners.
It’s still not clear whether the insurtech’s $175 million Hestia Re Ltd. (Series 2022-1) catastrophe bond could begin to pay-out as well for the company, with this cat bond still marked-down in the secondary market suggesting investors still consider it partially at-risk.
Kin reported that catastrophe loss activity added 14.1% to the loss ratio for its reciprocal exchange insurer during 2022.
Of that, hurricane Nicole contributed 8.5% in the fourth-quarter.
Despite this and the impact of significant hurricane Ian in the third-quarter, Kin explained that the full-year 2022 catastrophe loss ratio was still below the 14.8% reported for 2021.
Reinsurance recoveries reduced the gross loss ratio in 2022, with seemingly a large proportion of hurricane Ian losses recovered.
Overall, Kin explained that of the $175 million in ultimate expected loss & loss adjustment expenses from hurricanes Ian and Nicole, 97% of the total was ceded to reinsurance capital under Kin’s excess-of-loss reinsurance program.
“We’re continuing to see very favorable trends with non-CAT adjusted loss ratio, which has decreased each of the last eight quarters,” explained Angel Conlin, chief insurance officer at Kin.
“We’re very pleased with our performance for both hurricanes. We kept the focus on our customers and are delivering projected loss results that outperform the modeled estimates,” Conlin added.
At this time, Kin’s catastrophe bond, the Hestia Re deal, is still one of those marked down by brokers in their cat bond pricing sheets.
The lowest bid mark we’ve seen across recent pricing sheets for Kin’s Hestia Re cat bond is 73 cents on the dollar, with others marking it at 75 and 80.
However, the Hestia Re cat bond notes had been marked down at 65 and a little lower in December and prior, so it seems some recovery in value of that position has begun and the view of cat bond investors is that the chances of it facing a loss may have reduced somewhat.
That said, the Hestia Re cat bond will remain available should Kin’s losses from hurricanes in 2022 creep higher over the coming months, providing an additional and valuable source of protection for those events should their ultimate increase, as well as any hurricanes through this coming year and to the end of its protection term.
The Hestia Re cat bond provides coverage above a $125 million attachment point for Kin, covering a share of losses across a layer of its reinsurance tower rising to exhaustion at $325 million of losses.
However, it’s important to note that Kin’s FHCF reinsurance protection insures to the benefit of the Hestia Re catastrophe bond, effectively lifting the attachment point higher, on a gross loss basis.
We’d previously seen documentation that suggested a gross attachment of around $325 million for the Hestia Re cat bond, once the FHCF cover was taken into consideration, but that was before last year’s mid-year renewals, so the effective attachment point could have changed at that time.
As a result, it is still a little difficult to know just how exposed the Hestia Re cat bond actually is to losses from hurricane Ian. But given the secondary marks have been rising, it is possible the cat bond is now deemed less exposed, as Kin’s ultimate loss from the event is firmed up.
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