Universal sees up to $415m reinsurance claim after hurricane Irma

Florida headquartered primary insurance company Universal Insurance Holdings expects to benefit from up to $415 million of its reinsurance to assist in paying its claims from hurricane Irma, with its reinsurers and participating ILS funds helping the firm to keep its net loss to just $35 million.

The insurer said that its Universal Property & Casualty Insurance Company (UPCIC) subsidiary expects gross losses from Hurricane Irma to be between $350 million and $450 million, but that after reinsurance its net pre-tax losses would only amount to $35 million, its first event net retention under the reinsurance program.

The company said that if it can recoup any further reinsurance recoveries from its supplemental Non-Florida reinsurance program, it could further reduce its $35 million retention.

At this level of estimated loss, Universal expects that the full UPCIC reinsurance tower of $2.65 billion of coverage will remain available for any future events.

Additionally, the insurers American Platinum Property and Casualty Insurance Company (APPCIC) expects just $1 million to $2 million of gross losses from Irma, which will be fully retained as it falls within the $2 million retention of that firms reinsurance program. APPCIC also has its full reinsurance tower available for any future events, the company said.

The capital markets stand to pay a significant share of Universal’s hurricane Irma losses, with ILS fund manager Nephila Capital having a large participation in the reinsurance program, as well as other ILS and collateralized reinsurance markets.

Universal also has another layer of protection against catastrophe losses in the form of a parametric risk-linked contract, but it is assumed this will not payout given Irma’s winds likely not being sufficiently strong once onshore to trigger the insurance coverage.

Universal also said that it expects no losses from either Hurricane Harvey or Hurricane Maria (which primarily affected the Caribbean and Puerto Rico), as its insurers have no exposure in the affected areas. It also expects little or no losses from Hurricane Nate.

Universal Chairman and Chief Executive Officer Sean P. Downes, commented; “We are thankful that our dedicated staff, disaster preparedness planning and conservative reinsurance program placed with strong reinsurance partners helped to limit the overall financial impact of these events. We have had approximately 50,000 claims reported relating to Hurricane Irma to date, over 90% of reported claims have already been inspected, and nearly 50% of reported claims have already been closed.

“We also highlight our extensive second event coverage and our solid financial position as we move through the remainder of the 2017 hurricane season. Additionally, as we begin to look forward, it is important to note that over 60% of the UPCIC reinsurance capacity estimated to be impacted is part of multi-year deals with dedicated limit and pricing already determined for future years, which will serve to protect UPCIC in the event of a hardening reinsurance market. We remain committed to fully supporting our policyholders in this time of need and delivering outstanding value to Universal shareholders.”

Reinsurance and ILS capital is destined to support insurers like Universal as they deal with losses from recent hurricanes. Without the available liquidity in reinsurance and ILS markets, many insurers would be facing much larger hits to their capital and ultimately passing on greater price increases to their customers.

Reinsurance capital will help to moderate the impacts of recent hurricanes for insurers, shareholders and their policyholders alike.