Universal chief risk officer expects flat reinsurance cost in 2018

Universal Insurance Holdings chief risk officer Jon Springer believes that the company will be able to keep its reinsurance costs in 2018 at the same level as 2017 despite record catastrophe losses last year from hurricanes and rate increases in the primary business.

For its primary business, Universal received approval for a 3.4 percent average state-wide rate increase by the Florida Office of insurance regulation in early December.

Taking into account the multiyear capacity of the insurer and the coverage Universal purchased from the state-run Florida Hurricane Catastrophe Fund (FHCF), the firm has just 32 percent of total reinsurance premium budget up for renewal at June 1, Springer said during the insurer’s first quarter results conference call.

After receiving and evaluating quotes from its lead reinsurers, Universal has entered the market with firm order terms on the core all states catastrophe tower for its unit Universal Property and Casualty Insurance Company (UPCIC), Springer said.

“At this point in the process, I'm not going to comment on specific pricing levels, but I will say that when you factor in all of the variables, including the [Florida] rate change, the 2018 renewal is shaping up to be a year where we'll be keeping our catastrophe retention at the same level, buying catastrophe coverage to a higher level and spending the same or less as a percent of earned premium to do so,” Springer said.

The year 2017 saw record catastrophe losses driven by hurricanes and earthquakes in North America. In October 2017, Universal released a public  estimate of $350 million to $450 million in gross losses from Hurricane Irma. The reinsurance tower for UPCIC extends to $2.8 billion.

The manner in which the reinsurance programme responded, reduced UPCIC’s retention for this event to $27.2 million, Springer noted. Following a comprehensive review of the event, Universal is now advising that the estimate of gross losses relating to Hurricane Irma is increasing by $50 million.

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