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Universal grows cat reinsurance tower to $3.4bn. Nephila a key market again


Universal Insurance Holdings, the Florida headquartered and expansive primary insurance carrier, has purchased the largest catastrophe reinsurance tower in its history for the second year running, lifting its Florida first-event cover to over $3.4 billion.

universal-insurance-logoThe insurance carrier continues to count insurance-linked securities (ILS) investment manager Nephila Capital as a key participant in its catastrophe reinsurance arrangements, citing the company first among its largest counterparties.

A year ago, Universal Insurance said it had secured the largest private market catastrophe reinsurance renewal in its history, with a catastrophe reinsurance tower that extended up to $3.26 billion of coverage, $1.3 billion of which had limits that would automatically reinstate.

This year at the renewals, for its Universal Property & Casualty Insurance Company subsidiary, the company said it has set the top of its reinsurance tower for a single Florida event at $3.413 billion, while $1.06 billion has limits that automatically reinstate to guarantee some protection in multi-event scenarios.

It is the most open market catastrophe capacity that Universal has secured in its history.

The total cost of the 2021-2022 reinsurance program for subsidiaries UPCIC and American Platinum Property and Casualty Insurance Company (APPCIC) is  projected to be around 36.4% of estimated direct earned premium for the 12-month treaty period.

That’s in-line with previous guidance from Universal and compares to 34.6% of premium paid a year earlier, which the insurers said reflects a 5.2% year-over-year increase.

In naming its largest private reinsurance market counterparties, Universal cited in this order Nephila Capital via Allianz Risk Transfer, RenaissanceRe, Munich Re, Chubb Tempest Re, Everest Re and Lloyd’s of London syndicates, all of which maintain a rating from S&P Global of A+ or higher.

On top of the main occurrence reinsurance tower, UPCIC secured $383 million of multi-year catastrophe capacity to provide coverage to include the 2022 and 2023 wind seasons, the company said.

On top of this, Universal’s debut catastrophe bond, the $150 million Cosaint Re Pte. Ltd. (Series 2021-1) transaction, provides one limit covering multiple wind seasons as well.

“We are pleased to announce the completion and outcome of the 2021-2022 reinsurance programs for both of our insurance companies,” Matthew J. Palmieri, President of Universal Property and Casualty Insurance Company commented. “On the heels of a very difficult year in 2020 from a catastrophe loss perspective as well as the continued uncertainty from the global Covid 19 pandemic in the first half of 2021, our reinsurance partners have provided us with the comprehensive reinsurance coverage we desire for the 2021 hurricane season.

“2021 marks some significant milestones for UPCIC as it completed its inaugural catastrophe bond transaction, Cosaint Re Pte. Ltd, and also secured more private market reinsurance coverage than at any point in its long tenure as a leading provider of homeowners’ insurance in Florida and other catastrophe prone states.

“We were able to secure the desired coverage by maintaining our strong historical relationships while expanding our panel with many additional quality counterparties in 2021.

“As expected, our reinsurance costs have increased over the 2020-2021 period for a variety of factors, but with the on-going primary rate increases moving through our portfolio as well as other risk mitigation strategies being implemented, we believe we are set up well to handle the changes.”

UPCIC’s first event catastrophe retention for a Florida loss has increased by $2 million to $45 million this year. which Universal said would represent approximately 7.5% on an after-tax basis of UVE’s stockholder’s equity as of March 31, 2021.

The retention for a loss involving states other than Florida has been held at $15 million, which is roughly 2.5% on an after-tax basis of UVE’s stockholder’s equity as of March 31, 2021.

The company noted that this Non-Florida reinsurance retention has been maintained flat despite the company growing its Non-Florida exposures by more than 20% over the past year.

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