United (UPC) grows cascading cat reinsurance limit, renews quota share

United Insurance Holdings (UPC Insurance) has increased the size of its catastrophe reinsurance program for 2020, buying additional cascading limit to cover multiple events and renewing its core quota share arrangement.

United (UPC) focused on traditional and collateralised sources of reinsurance for its 2020 renewal, opting not to renew its catastrophe bond earlier this year as it found support lacking at the price point it was seeking, as we’d previously reported.

The company has renewed reinsurance protection for its main subsidiaries, American Coastal Insurance Company, Family Security Insurance Company, Inc., Interboro Insurance Company, Journey Insurance Company, United Property & Casualty Insurance Company, and Blueline Cayman Holding, at the recent June reinsurance renewal.

As we reported, rates are up considerably for Florida and other regions and United (UPC) acknowledged paying a higher cost for its renewal coverage, but also noted that its reinsurance spend increased at a slower rate than the growth in premiums in-force.

The insurer has secured almost $3.26 billion of multi-event cascading catastrophe reinsurance limit for its core protection, up $101 million, or 3.2%, from the $3.156 billion purchased at the 2019 renewal.

This main catastrophe tower covers American Coastal Insurance Company, Family Security Insurance Company, Inc. and United Property & Casualty Insurance Company.

In addition, a 90% participation in the FHCF will provide $1.7 billion of Florida-only reinsurance protection, at varying retentions and limits across three separate FHCF contracts, which inure to the benefit of the open market catastrophe reinsurance program.

It’s protection for a 1-in-350 year event United (UPC) explained and also sufficient coverage for a 1-in-100 year event followed by a 1-in-50 year event in the same season, with the cascading feature meaning the coverage drops down as lower layers of the reinsurance tower are eroded by catastrophe events.

The insurer has also purchased $57 million of limit per occurrence and $79 million in the aggregate, enough for a 150 year event, or a 1-in-100 year event followed by a 1-in-50 year event in the same season, for Interboro Insurance Company.

For Blueline Cayman Holdings, the insurer has purchased $111 million of reinsurance limit per occurrence and $222 million in the aggregate, which covers two 1-in-250 year events.

Journey Insurance Company, UPC Insurance’s AM Best A- rated insurance company, has also purchased a larger reinsurance program at $31.9 million, covering more than a 1-in-250 year event, or a 1-in-100 year event followed by a 1-in-200 year event in the same season, and with the coverage cascading again.

For cost efficiencies, the insurer has also utilised its UPC Re reinsurance vehicle as a way to help reduce the retention across the group, taking a a $12.5 million co-participation on the $69.3 million first-event retention.

In addition, United (UPC) expanded its multi-year catastrophe excess of loss reinsurance limit by $55 million to $405 million.

The company also renewed its quota share reinsurance arrangement that covers both United Property & Casualty Insurance Company and Family Security Insurance Company, Inc.

The quota share was renewed at the expiring cession rate of 22.5% with the existing reinsurers, covering all catastrophe perils and attritional losses for the insurers.

United (UPC) said that the reinsurance program renewal has cost it $404 million, up by $26.7 million or 7.1%, from the 2019/20 catastrophe reinsurance placement.

However, on a premiums in-force basis the cost has actually dropped, demonstrating the economies of scale that can be achieved as carriers grow, costing the equivalent of 29.2% of the March 31, 2020 in-force premium, a decrease from 29.5% of the March 31, 2019.

As ever, the ILS fund market and collateralised reinsurers will have played a role in getting United (UPC’s) program renewal over the line.