Property and casualty insurance company United Insurance Holdings (UPC Insurance) has consolidated two quota share arrangements into one new 20% quota share at the January reinsurance renewal, and also renewed an aggregate excess of loss arrangement with a single reinsurer counterparty.
United’s reinsurance arrangements have typically been dominated by fully-collateralized coverage from ILS market players and other collateralized providers, so it’s safe to assume that the capital markets have played a key role again in the insurers 2018 renewal.
The renewed reinsurance arrangements provide coverage for in-force, new and renewal business underwritten by UPC Insurance. The quota share reinsurance only covers United Property and Casualty Insurance Company, while the aggregate excess of loss reinsurance covers a number of subsidiaries, American Coastal Insurance Company, United Property and Casualty Insurance Company, Interboro Insurance Company, and Family Security Insurance Company.
Both of the renewed reinsurance arrangements are designed to help United reduce financial volatility and to transfer broad-based risks from its book to the private reinsurance markets.
At its renewal, United has replaced its 15% quota share agreement that expired on November 30th 2017 and its 5% quota share agreement that due for renewal on December 1st 2017 with a new 20% quota share reinsurance agreement.
The new quota share reinsurance covers United for a 12 month term and sees the insurer ceding 20% of all subject business to participating reinsurers. The quota share covers ground-up losses from all catastrophe perils as well as any attritional losses. This helps to lower UPC Insurance’s retention for catastrophe losses. Reinsurers’ participation in paying attritional losses through the quota share is subject to an attritional loss ratio cap.
The aggregate excess of loss reinsurance arrangement has been entered into with a single reinsurance market, United said.
The aggregate treaty covers the insurer against losses from all catastrophe perils apart from hurricanes, tropical storms, tropical depressions and earthquakes. UPC will retain 100% of the qualifying losses up to 4.75% of the covered companies’ gross earned premium, while the reinsurer will then take all losses excess of 4.75% of that in the aggregate, but not to exceed $20 million over the term of the agreement.
Recoveries under the aggregate reinsurance treaty will be calculated on a quarterly schedule and be based on cumulative gross earned premium.
The aggregate coverage has been structured to help United manage volatility in its book from frequency catastrophe and weather loss events.
It’s not possible to know how much of the United program has been placed with third-party capital or ILS fund managers, but it is safe to assume that the capital markets will have taken a decent share of this January renewal given United’s history of leveraging alternative capital within its business.
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