United (UPC) renews reinsurance with lower retention & enhanced aggregate cover

United Insurance Holdings (UPC Insurance), the Florida headquartered insurer, has renewed its core catastrophe reinsurance program with changes to ensure it retains fewer losses and enhanced aggregate features to provide more protection against frequency loss events.

United (UPC) has changed its disclosures on its reinsurance program making comparison more challenging this year.

A year ago, the insurer increased the size of its catastrophe reinsurance program, buying additional cascading limit to cover multiple events, securing almost $3.26 billion of multi-event cascading catastrophe reinsurance limit for its core protection.

This year, the company has disclosed buying $2.85 billion of first event reinsurance limit on a fully cascading basis, except for the Florida Hurricane Catastrophe Fund layer.

A year ago, United (UPC) had renewed its quota share reinsurance arrangement  at the expiring cession rate of 22.5% with the existing reinsurers, covering all catastrophe perils and attritional losses.

For 2021, United (UPC) has only renewed a 15% quota share reinsurance treaty at June 1st, but having added more protection at the end of 2020, the effective quota share cession for the year ahead will now be 23%, the company said.

The main impact of the changes to the core catastrophe reinsurance tower is reduced retention for the coming hurricane season.

United (UPC) said that its per occurrence retention is now only $15 million for both the first and second events, down from $46.25 million for the first event and $17.5 million for the second event in 2020, a 53% reduction in aggregate.

At the same time, its renewed Core CAT program contains enhanced aggregate coverage features, designed to further limit the accumulation of hurricane and earthquake retained losses, the insurer explained.

As a result, should the 2020 hurricane season repeat itself, United (UPC) said that the reinsurance tower it has renewed will limit its net retained hurricane losses to $31 million for its core portfolio of residential and commercial property insurance.

The core catastrophe (Core CAT) reinsurance program and quota share cover United Property & Casualty Insurance Company (UPC), Family Security Insurance Company, Inc. (FSIC) and American Coastal Insurance Company (ACIC).

The insurer has reinsurer the business written by Interboro Insurance Company and Journey Insurance Company separately and has not disclosed that this year, yet.

United (UPC) is also working on strategic changes, the insurer has revealed.

It said that in looking to further deleverage its capital and balance commercial and personal lines, the insurer is “considering strategic and financial alternatives to create capacity for expanding commercial specialty underwriting and general corporate purposes, including the retention of Raymond James & Associates and the possible sale of Interboro Insurance Company.”

One way of creating that capacity could be through the purchase of additional reinsurance, for example on a quota share basis.