Kingstone Companies strikes reinsurance deal under better conditions

US-based multi-line regional property/casualty insurer Kingstone Companies said on July 10 that its unit Kingstone Insurance Company (KICO) reached a reinsurance deal with increased coverage, improved terms, and a further reduction in exposure-adjusted reinsurance costs.

The deal includes various reinsurance agreements with multiple reinsurers for the treaty year beginning July 1, 2017.

A catastrophe excess of loss reinsurance treaty includes $315 million in coverage purchased from a panel of 43 individual reinsurers. This represents an increase of 27.5 percent from the $247 million purchased in the expired term and is a result of Kingstone’s growth along with the rating agency requirements, according to the statement.

After the $5 million direct retention (of which the net share is $4.0 million), the company is now covered for up to a $320 million ground-up loss event. KICO obtained a 13.6 percent exposure-adjusted rate reduction compared to the corresponding premium paid for catastrophe coverage on the expired treaty.

KICO purchased reinstatement premium protection for the $145 million limit attributable to the 100 year return period. This is well in excess of the prior term when RPP was purchased on the first $20 million limit, according to the statement.

KICO also purchased coverage protecting up to a 1-in-278 year event. The maximum pre-tax retained loss in a catastrophe event increased from $3.0 million to $4.0 million as a result of a reduction in the personal lines quota share ceding percentage.

At the same time, the company has reduced the ceding percentage of its personal lines quota share treaty to 20 percent from 40 percent in the previous treaty.

For the per-risk excess of loss treaties, KICO as agreed on a maximum single risk retention on any one loss (pre-tax) in personal lines of $1.0 million up from $833,000 in the prior treaty. In the commercial lines the maximum single risk retention is now at $750,000, up from $500,000 in the prior treaty.

Total protection for per-risk excess of loss treaties now includes up to a $4.5 million single loss, covering the maximum policy limits currently offered by the company. An automatic facultative facility was established, allowing for KICO to obtain homeowners single risk coverage up to $10.0 million in total insured value.

“We are very happy with the increased coverage and terms for catastrophe reinsurance obtained in the new treaty,” said Benjamin Walden, EVP and chief actuary. “Due to favourable reinsurance market conditions and our continued strong financial condition, we secured increased protection, covering us to more than a 1-in-250 year event, at rates substantially lower than we paid last year. We have increased our net retention after quota share to $4 million, in line with our surplus growth. We further increased our reinstatement premium protection to cover up to a 1-in-100 year event. This means that even a storm significantly larger in scale than Superstorm Sandy would not seriously impact our financial strength. Such a storm would have an after tax effect approximately equal to just one quarter's worth of average net income.”

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