United (UPC), Heritage, HCI all confirm hail as largest Q1 Florida cat loss

Floridian primary insurers United Insurance Holdings (UPC Insurance) and Heritage Insurance Holdings, Inc. have both confirmed that the Brevard County hail storm at the end of March was the biggest catastrophe event of the quarter for the state.

The hail storm struck in the last week of March and has been called the most significant hail event in Brevard County records, as large hail as big as 2 inches in diameter fell in the Indialantic area, while more widely hail as large as coins fell across Canaveral Groves, Cocoa, Rockledge, Merritt Island and Satellite Beach for around ten minutes.

After the announcements on quarter losses last week including the hail, some of the major Floridian primary insurers have seen their share prices decline.

The National Weather Service (NWS) said that it was actually two separate hailstorms following close behind one another that struck the region, with the impacts being smashed windows, damaged cars, roof damage and destroyed outdoor structures such as pool enclosures.

Given the impacts and widespread nature of the large hail event, the major Floridian primary insurers are all reporting impacts and losses from the storm, raising the potential for some erosion of aggregate reinsurance deductibles as well as some losses to be shared through reinsurance quota shares, given the early stage of the year.

Owner of Homeowners Choice Property & Casualty Insurance Company, Inc., HCI Group, said it expects a loss of $4 million to $7 million from the hail event.

“Hailstorms occur this time of year in Florida,” explained Paresh Patel, HCI Group’s chairman and chief executive officer. “Because it was wind-driven, it not only damaged the roofs of homes, but the siding, windows, and fences as well. Fortunately, we were prepared for such an event, and have been able to respond fully and swiftly to our policyholders’ claims.”

Heritage said that it expects around $10.2 million of net losses from the severe hailstorm in Brevard County, making up the bulk of an expected $15.4 million of net catastrophe losses in the first quarter of 2019.

Heritage also explained that as its gross quota share reinsurance coverage for subsidiary Narragansett Bay Insurance Company was reduced to 8% at June 1st 2018 from the 18.75% it had previously been, it expects to retain more northeastern catastrophe losses in the first half of the year, especially in the first quarter. The addition of the hail losses could exacerbate this for the firm.

Meanwhile, United’s UPC Insurance announced first-quarter catastrophe losses of $18 million before tax (approximately $13 million after tax) after taking into account expected reinsurance recoveries.

The bulk of these losses came from the Brevard County hailstorm, while another 6 catastrophe events added the rest of the financial impact.

UPC also warned that it experienced “higher than expected development on prior year catastrophe events during the quarter” which suggests further loss creep, possibly from hurricane Irma and Michael.

The impacts of this hail storm in Florida may flow through to some insurance-linked securities (ILS) fund managers who provide quota share reinsurance protection to Florida primary players, while it will also erode any exposed aggregate layer deductibles as well.

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