United (UPC) adds $150m to gross hurricane Irma loss

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United Insurance Holdings (UPC Insurance), the Florida headquartered and still focused insurer, has revealed a further $150 million of loss creep related to 2017’s hurricane Irma, which the company booked at the end of Q1 2021.

united-upc-insurance-logoAt the same time, United (UPC) believes that the rate of litigation related claims inflation that the Florida property insurance market has been suffering will slow considerably once the latest legislative actions come into force later this year.

As we explained earlier this week, the insurer said it anticipates the Florida personal lines property insurance market remaining “very firm for the foreseeable future”.

United (UPC) also revealed additional reserve strengthening at the same time, a $30 million strengthening of both catastrophe and non-catastrophe Prior Year Reserves for Florida personal lines exposures, but it seems that the actual loss creep it suffered was much higher.

During the insurers first-quarter 2021 earnings call yesterday, United (UPC) President and CFO Brad Martz explained that the company had reevaluated its losses from hurricane Irma at the end of March.

The upshot of this reevaluation was a $150 million increase to the insurers gross loss from hurricane Irma over just one quarter.

This could have had some minor impact on the companies reinsurance partners (if the tower hasn’t already been exhausted) while likely driving further recoveries under coverage from the Florida Hurricane Catastrophe Fund.

United (UPC) has analysed litigation trends and found they continue to head upwards, with some $15.3 billion paid by insurers under lawsuits in Florida between 2013 and 2020.

71% of those payments funded attorney fees, while one-way attorney fee statute has been the driver of frivolous suits and currently attempts to reform legislation has fallen short.

Litigation has significantly accelerated since hurricane Irma in 2017, driving the loss creep and much of the issues Florida’s insurance market now faces.

But United (UPC) is confident that legislative changes under SB 76 and SB 1598 will provide much needed relief.

This is largely due to meaningful changes to the one-way attorney fees statute, which makes frivolous litigation more difficult, the company said.

In particular, the reduced time-frame to file lawsuits should help to shorten the tail associated with major property catastrophe events in Florida, while the changes to one-way attorney fees will make it less appealing to file in the first place.

United (UPC) is now placing its June reinsurance renewal and has been pleased with the response of the market, despite the clear challenges still faced in Florida.

CFO Martz explained, “Our team made exceptional progress on renewing our core catastrophe reinsurance program that will become effective June 1st 2021.

“I’m happy to report we’ve secured commitments from our reinsurance partners in excess of the total limit being sought and are now in the process of determining the final allocation of lines.”

United (UPC) will have a greatly reduced retention it seems, with this being brought down to $70 million in the aggregate and $25 million per-occurrence for first and second events.

Martz continued, “We are able to retain our aggregate cascading structure, which we believe provides superior protection against risk and the risk-adjusted cost increase is likely to be in the mid-single digits.

“But this is not finalised yet, because we are still evaluating various options related to reducing our occurrence and aggregate retention.”

This renewed reinsurance program is expected to put United (UPC) in good shape for the hurricane season though and Martz said, “The most significant change we expect to make this year is reducing our potential earnings volatility in the second-half of 2021 from named windstorms.”

United’s (UPC) experience with hurricane Irma still creeping and escalating litigation reflects the main challenge Florida’s property insurance market has faced and drives home the fact lesser capitalised carriers are set to really struggle at the reinsurance renewals.

Also read:

United (UPC) says Florida to remain “very firm for the foreseeable future”.

“Significant increase” in litigated Florida claims in Q1: United (UPC).

Access to capital key in “dysfunctional” Florida insurance market.

Florida Citizens growth suggests takeout opportunity returning.

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