Universal Completes $696M Reinsurance Program; Five Others in Florida May Not

By | June 1, 2022

As many as five Florida property insurers are unlikely to be able to secure adequate reinsurance by today’s deadline, but the state’s largest carrier is not one of them.

Universal Insurance Holdings announced Tuesday that its subsidiaries, Universal Property & Casualty and American Platinum Property & Casualty, had completed their 2022-2023 reinsurance programs.

“Against a backdrop of wide-ranging macro-economic pressures globally and an extremely challenging property insurance and reinsurance marketplace, particularly in the markets that we serve, we were able to secure the extensive reinsurance program we desired for the 2022 hurricane season,” Universal President Matthew Palmeiri said in a statement.

Universal said it had secured more open-market catastrophe capacity than at any time in its history. The total cost of reinsurance for both carriers for the next 12 months is about $696 million. That reflects about 37.6% of direct premiums, up from 36.4% last year.

“As expected, our reinsurance costs have increased modestly over the 2021-2022 period, but remain in line with our expectations and give us the operational stability and coverage certainty we need to execute our plan well into the future,” Palmeiri said.

The largest reinsurers participating in the carriers’ program include Nephila Capital, RenaissanceRe, Munich Re, Chubb Tempest Re, Everest Re and Lloyd’s of London syndicates.

Universal P&C also has secured $383 million of multi-year catastrophe capacity below the Florida Hurricane Catastrophe Fund. The carrier apparently did not participate this year in a $2 billion reinsurance program established last week by the Florida Legislature that will provide a one-time premium-free backstop, but only for hurricane losses.

Universal Insurance Holdings appears to have bounced back from a $48 million loss reported for the fourth quarter of 2021. The company took some significant steps in the past year, including shedding about 60,000 of Universal P&C’s policies. Universal now has about 916,000 policies in force, while written premium has increased.

Last month, the carrier also filed for a 14.9% average rate increase for all homeowners policies, including a 17.3% hike for HO-3 coverage.

Other carriers may not be so fortunate and are facing reinsurance renewals that, by some reports, are expected to cost 20% more than last year as some reinsurers have pulled back from the distressed Florida market.

Of the 41 companies reviewed by Demotech, four or five now appear to be coming up short on their reinsurance programs, Joe Petrelli, president of the Demotech financial rating firm, said Wednesday. Without full reinsurance, those firms will most likely lose their financial stability ratings, which could lead to rehabilitation or even insolvency proceedings.

The Florida reinsurance situation may not be as dire as many have predicted: The number of carriers expected to be left in the cold is far fewer than the 20 to 25 that Demotech had warned about earlier this year.

Topics Florida Reinsurance

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