Contract with more than 40 reinsurers is for 2008 property catastrophe
Assurant has finalised the structure of its 2008 property catastrophe reinsurance programme, effective for both January 1 and June 1, 2008.
"We are pleased with the breadth of our catastrophe reinsurance programme," said Gene Mergelmeyer, president and chief executive officer of Assurant Specialty Property. "We were able to secure higher levels of coverage to support our significant growth, while maintaining storm deductibles comparable to last year and under more favourable pricing. This year, we also initiated a deliberate long term strategy to secure a small portion of our per occurrence cat reinsurance coverage on a two-year term basis to help ensure capacity and level pricing over time."
Effective for both January 1 and June 1, 2008, Assurant has placed its property cat reinsurance programme with more than 40 highly rated reinsurers. There are three parts of the reinsurance programme:
First, the Florida Hurricane Catastrophe Fund ("FHCF"), including the Temporary Increase in Coverage Limit ("TICL"), provides Florida-specific coverage. For Florida hurricanes, the FHCF/TICL programme is utilised before Assurant's per occurrence property cat reinsurance programme. Retentions and limits are estimated based on the individual Assurant legal entities that participate in the FHCF/TICL programme. In aggregate, the 2008 coverage provides for a $639m catastrophic occurrence with a $515m limit after a combined retention of $124m.
Second, Assurant purchased per occurrence cat reinsurance coverage for a $770m catastrophic occurrence with a $675.25m limit in excess of a $94.75m retention. Included in this cover is an automatic reinstatement for a second occurrence under terms similar to the first occurrence. The majority of the programme has been placed with a one year term, and a small portion has been placed with a two year term.
Third, the company has placed aggregate hurricane coverage as protection for multiple storms with a limit of $90m in excess of $80m retention. Losses in excess of $10m per occurrence are eligible and no one event can contribute more than $40m.
Base pretax 2008 reinsurance premiums, which are a reduction to net earned premiums, are estimated to be $129m in 2008, compared with $134m in 2007. Base reinsurance premiums could vary if premium growth varies significantly from estimates. It is important to note that the expected reinsurance premiums do not include reinstatement premiums, which may be contractually required as a result of the actual frequency and severity of the 2008 catastrophes covered by the reinsurance programme.
In structuring the property catastrophe reinsurance programme, Assurant applies a disciplined risk management process including utilising multiple catastrophe models to evaluate the estimated loss potential from various perils, analysing the geographic spread of risk and quantifying the reinsurance cost relative to the coverage provided, as well as the credit quality, financial strength and claims paying ability of the reinsurers.