US insurer Assurant, a sophisticated and large buyer of catastrophe protection for US risks, has revealed multiple enhancements to its reinsurance programme as it leverages both lower traditional reinsurance rates and the healthy appetite of cat bond investors.
The changes to the company’s reinsurance programme reflect a growing trend of US cedants leveraging the favourable market conditions to negotiate better deals for themselves. Cedants are increasingly paying less for more robust traditional coverage and complementing this with insurance-linked securities (ILS) products.
Assurant’s 2014 catastrophe reinsurance programme benefits from a much lower retention, expanded multiple storm coverage and layers of multi-year fully collateralised coverage financed with catastrophe bonds.
“The comprehensive 2014 program expands upon our multi-year, multiple-event coverage, takes advantage of favorable rates, and ensures we are ready to assist our customers and clients when devastating weather events occur,” said Gene Mergelmeyer, president and chief executive officer, Assurant Specialty Property.
Assurant said it placed its traditional catastrophe programme in two phases, in January and June 2014, and used more than 50 reinsurers rated A- or better by AM Best. It supplemented a traditional per-occurrence programme through reinsurers with multi-year fully collateralised coverage, financed with catastrophe bonds to further diversify sources of reinsurance capacity.
Specifically, its retention reduced in 2014 to $190 million compared with $240 million in 2013; an expanded multiple-storm coverage provides $50 million of first-event coverage in excess of its retention; and increased multi-year coverage provided a $342 million limit for multi-year coverage in addition to the previously issued Ibis Re II catastrophe bonds.
Its per-occurrence catastrophe coverage provided protection of up to $1.8 billion in excess of its $190 million retention. The coverage is structured in several layers and placed through traditional reinsurance and catastrophe bonds.
Its cat bond programme provided $315 million of multi-year, fully collateralised hurricane coverage through $130 million issued in January 2012 and $185 million issued in June 2013 by Ibis Re II. The reinsurance purchased in 2013 from Ibis Re II comprises three separate layers of coverage for protection against losses from individual hurricane events, including catastrophe prone areas along the Gulf and East coasts of the US, Hawaii and Puerto Rico.
Finally, the Florida Hurricane Catastrophe Fund (FHCF) coverage, provides Florida-specific coverage for 90 percent of losses up to $494 million in excess of a $181 million retention.
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North America, Assurant, Gene Mergelmeyer