Federal National agrees to 2018-2019 reinsurance programme

Federated National Holding Company has finalised its excess of loss catastrophe reinsurance programme for 2018-2019.

The programme will provide Federated National and its wholly-owned insurance subsidiaries, Federated National Insurance Company (FNIC) and Monarch National Insurance Company (MNIC), approximately $1.34 billion of reinsurance coverage in excess of $23 million retention for catastrophic losses, at an approximate total cost $153 million.

The cost of the programme represents a saving of approximately $27 million from the final costs of the 2017-2018 reinsurance programmes.

This saving is reflected in a 5.8 point decrease in the ceded premium to gross written premium ratio from 33.9 percent for the 2017-2918 reinsurance programme to projected 28.1 percent for the 2018-2019 reinsurance programme.

Federated National said its recent acquisition of the minority interests of MNIC, and the subsequent combination of both FNIC and MNIC under a single programme has allowed it to capitalise on efficiency and scale.

Of the combined 2018-2019 reinsurance programmes, $103.2 million is allocated for the private reinsurance for Federated National’s Florida exposure, including prepaid automatic premium reinstatement protection, along with approximately $47.2 million payable to the Florida Hurricane Catastrophe Fund.

Federated National said the combination of private and FHCF reinsurance treaties will afford FNIC and MNIC approximately $1.81 billion of aggregate coverage with a maximum single event coverage totalling approximately $1.34 billion, exclusive of retentions.

FNIC’s non-florida excess of loss reinsurance treaties afford Federated National an additional $23 million of aggregate coverage, with $5 million first event coverage and $18 million second event coverage - with the incremental $13 million of second event coverage applying to hurricane losses only.

Overall, there is a non-Florida retention of $15 million for the first event and $2 million for the second event, through retentions are reduced to $7.5 million and $1 million after taking into account the profit sharing agreement that FNIC has with the nonaffiliated managing general underwriter that writes our non-Florida property business. The cost of FNIC’s non-Florida reinsurance programme will be approximately $2.6 million for private reinsurance, including prepaid automatic premium reinstatement protection.

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