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Federated National Holding discloses terms of reinsurance program

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Federated National Holding discloses terms of reinsurance program

Federated National Holding Co. has agreed to the terms of its excess of loss catastrophe reinsurance program for 2018-2019.

The reinsurance program will provide the company and its subsidiaries, Federated National Insurance Co. and Monarch National Insurance Co., about $1.34 billion of reinsurance coverage in excess of a $23 million retention for catastrophic losses, including hurricanes, at an approximate total cost of $153 million.

Federated National Holding has combined Federated National Insurance and Monarch National Insurance under a single program, which will be effective July 1, and all private layers have prepaid automatic reinstatement protection. The Federated National Insurance and Monarch National Insurance private market excess of loss treaties cover both Florida and non-Florida exposures.

The combined 2018-2019 reinsurance programs are estimated to cost $153 million, which includes roughly $103.2 million for the private reinsurance for Federated National Holding's Florida exposure, along with about $47.2 million payable to the Florida Hurricane Catastrophe Fund, or FHCF. The combination of private and FHCF reinsurance treaties will afford Federated National Insurance and Monarch National Insurance around $1.81 billion of aggregate coverage with a maximum single event coverage totaling about $1.34 billion, exclusive of retentions.

Federated National Insurance's single event pretax retention for a catastrophic event in Florida is $20 million, up slightly from the 2017-2018 reinsurance program. Monarch National Insurance's single event pretax retention for a catastrophic event is $3 million, down slightly from the 2017-2018 reinsurance program.

Federated National Insurance's non-Florida excess of loss reinsurance treaties afford the company an additional $23 million of aggregate coverage with first event coverage totaling $5 million and second event coverage totaling $18 million, with the incremental $13 million of second event coverage applying to hurricane losses only. The end result is a non-Florida retention of $15 million for the first event and $2 million for the second event, though these retentions are reduced to $7.5 million and $1 million after taking into account the profit-sharing agreement that Federated National Insurance has with the nonaffiliated managing general underwriter that writes the companies' non-Florida property business.

Federated National Insurance's non-Florida reinsurance program cost will approximate $2.6 million for the private reinsurance, including prepaid automatic premium reinstatement protection.