United (UPC) renews collateralized aggregate reinsurance, adds to other perils cover

Florida headquartered, expansive primary insurer United Insurance Holdings (UPC Insurance) has renewed a range of its reinsurance covers for aggregate, attritional and other natural perils.

At the January renewals, the insurer renewed its aggregate excess of loss reinsurance, which covers frequency events for the company, as well as its all other perils catastrophe excess of loss agreement and personal property excess per risk reinsurance agreement.

All of the renewed reinsurance contracts provide United (UPC) with protection for in-force, new and renewal business effective January 1st 2020, but are focused on the kind of attritional and secondary perils that can erode profitability, rather than the very large risks of hurricanes and earthquakes to which the company is also exposed.

All of the insurers subsidiaries are covered by the renewals, American Coastal Insurance Company, United Property and Casualty Insurance Company, Family Security Insurance Company, and Interboro Insurance Company.

The aggregate excess of loss reinsurance cover renewal sees United (UPC) retaining a little more of the risk through 2020, with the company estimating that it will retain 100% of losses up to roughly 7% of its covered companies’ subject gross earned premium.

This aggregate arrangement has been renewed with a private reinsurer on a fully collateralized basis, United (UPC) said, which may possibly be one of the major insurance-linked securities (ILS) fund players.

The aggregate XoL reinsurance treaty covers the insurer for losses from catastrophe perils other than hurricanes, tropical storms, tropical depressions and earthquakes, with the collateralized reinsurance provider liable for all losses in excess of the 7% of gross earned premium retention in the aggregate, but not to exceed $30 million over the term of the treaty. Recoveries are to be calculated quarterly, based on the cumulative year-to-date gross earned premium of the insurer and its subsidiaries.

United (UPC) has also renewed its all other perils catastrophe excess of loss reinsurance with a panel of reinsurers all rated A- or better by A.M. Best.

This covers catastrophe loss events other than named windstorms and earthquakes, up to $110 million, which is $10 million more protection than this contract provided the insurer last year. The company also added a prepaid reinstatement to the $30 million of limit provided by the second layer of the program, adding again to its aggregate reinsurance provisions.

Finally, United (UPC) also renewed a personal lines property excess per risk reinsurance cover with a private reinsurer, securing $2.5 million of limit, excess of $1.5 million, to moderate the insurers personal property exposure to non-catastrophe losses from any single claim. The reinsurer is only liable for losses up to $7.5 million during this treaty period.

Reinsurance capital, both traditional and alternative, continues to play a key role in the growth of United (UPC), as the insurer brings capital into its business model from multiple sources and in novel structures.

It will be interesting to see whether any Florida-focused insurers like United (UPC) return to the catastrophe bond market in 2020, given the value currently being seen in that market by sponsors.