FedNat expects $275m loss from hurricane Michael
FedNat Holding Company estimates that its aggregate gross losses as a result of hurricane Michael will be approximately $275 million, the bulk of which will be covered by reinsurance.
On Wednesday afternoon, October 10, 2018, Hurricane Michael made landfall near Panama City, Florida, as a strong Category 4 hurricane and then impacted Alabama and Georgia, as a major hurricane.
FedNat purchased a combined reinsurance programme for both FedNat and Monarch National that took effect on July 1, 2018. The reinsurance programme covers both Florida and Non-Florida exposures and affords both carriers approximately $1.8 billion of aggregate coverage with a maximum single event coverage totalling approximately $1.3 billion.
FedNat’s single event pre-tax retention for a catastrophic event in Florida is $20 million and Monarch National’s single event pre-tax retention for a catastrophic event is $3 million.
Given the limited non-Florida expected aggregate gross losses as a result of hurricane Michael, the company does not expect any recoveries from its non-Florida property catastrophe excess of loss coverage, which has a first event retention of $15 million, but any non-Florida aggregate gross losses will be included in the core reinsurance programme described above. Furthermore, the impact on FedNat of any non-Florida net losses from hurricane Michael will be reduced as a result of the profit sharing agreement that FedNat has with the non-affiliated managing general underwriter that writes its non-Florida property business.
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