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FedNat reinsurers pick up $562mn of Q3 cat losses

FedNat Insurance logo Fort Lauderdale Florida.jpg

FedNat transferred $562mn of its $599mn gross catastrophe losses to reinsurers in the third quarter, company executives said on an earnings call.

The bulk of the gross losses - $575mn - stemmed from Hurricane Ida, and the vast majority of its reinsurance recoveries were linked to its excess of loss reinsurance treaties.

Just $4mn was recovered under quota share treaties. The $37mn of retained cat losses was partly offset by $17mn of earnings revenue from the firm’s claims-handling affiliate. Net of reinsurance and claims fees, the cat events contributed 38 points to its loss ratio for the quarter.

According to SNL data, the reinsurance providers that assumed the most premium from FedNat in 2020 included Berkshire Hathaway’s National Liability & Fire, Swiss Re, Fidelis and Ace as well as its captive SageSure Anchor Re and the state reinsurer.

It is worth noting that sometimes premium-heavy deals can represent quota shares with limited cat exposure.

The next major group of reinsurer providers for FedNat by premiums ceded were PartnerRe, TransRe, Endurance (now Sompo International) and Everest Re.

For its ex-Florida subsidiary Maison Insurance, major providers included National Liability, Fidelis, PartnerRe, TransRe, Endurance/Sompo International, Lumen Re and the General Insurance Corp of India.

This came after the struggling carrier reported that it was exiting all non-Florida business as it posted a $25mn Q3 loss earlier this week.

It will put its Maison subsidiary into run-off. On the earnings call the firm said it did not expect to incur major costs to exit the business, as most of its expenses were commission-based variable expenses.

The CEO Michael Braun said the Maison business had been run with a “mean and lean” approach to staffing and it could redeploy any staff that had been working specifically on non-Florida business to other entities.

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