Universal goes beyond cat loss plan on Hawaii volcano & weather events

Florida headquartered and expansive primary insurer Universal Insurance Holdings has gone beyond its plan for second-quarter catastrophe losses, as impacts from the volcanic eruption in Hawaii and other meaningful weather events lifted its losses slightly.

Universal is a significant buyer of collateralized reinsurance coverage, with $3 billion of coverage and additional multi-year protection for 2018, in a program that sees the largest insurance-linked securities (ILS) fund investment manager Nephila Capital and other collateralized reinsurance players as major participants.

The catastrophe losses “beyond plan” in the second-quarter of 2018 won’t trouble Universal’s reinsurance panel though, given the firm has only gone $5 million beyond its budget for losses this quarter. So any impact to reinsurers would be minimal, if there is any at all at this half-way point of the year.

But the losses do reflect Universal’s continuing expansion into states other than Florida, as the insurer expands its property insurance to new regions and as a result the company is likely to require a growing reinsurance tower, which will please its reinsurance partners.

Universal CEO Sean P. Downes explained the firms results, “Universal once again reported excellent top line growth and strong underwriting profitability, leading to a solid bottom line result and an annualized ROE of 37.8% for the second quarter. We continue to post strong organic growth in our home state of Florida, while our expansion efforts into Other States remain on track and are delivering excellent results.”

The expansion also makes Universal more exposed to catastrophes and severe weather outside of Florida and in the second-quarter the insurer reported $5 million of weather and cat losses beyond plan and $2.3 million of unfavorable prior year reserve development, primarily related to Hurricane Matthew.

The company further explained that the beyond plan, or budget, cat losses were “related to the Hawaiian Volcano and several other meaningful weather events during 2018.”

The growth continued at Universal, as the firm underwrote 15.7% more premiums, compared to the prior year’s quarter, reaching $342.8 million. 13% of this premium growth was in the Florida book, but 36.5% was in other states, reflecting Universal’s continued expansion.

Finally, no loss creep related to hurricane Irma was reported, but reflecting the diverse business model Universal follows the firm reported increased income from its specialist loss adjusting team, which in the wake of hurricane Irma saw increased demand and delivered additional profit of $8.4 million, the majority of which was due to their work following Irma.