Heritage Insurance Holdings Inc., a super-regional property and casualty insurance holding company announced the full placement of the 2023-2024 indemnity-based, catastrophe excess-of-loss reinsurance program. This program is for its statutory insurance subsidiaries, which are Heritage Property Casualty Insurance Company, Narragansett Bay Insurance Company and Zephyr Insurance Company.
The 2023-2024 catastrophe reinsurance program includes a total combined cost of approximately $420.5 million. It accounts for 32% on March 31, 2023, premium-in-force, which is one point higher than last year’s cost which amounted to 31% on March 31, 2022, premium-in-force.
This is the first event reinsurance tower exhaustion points of $1.3 billion for the Northeast, $1.1 billion in the Southeast and $870 million in Hawaii. The program will also include a $120 million Northeast-only limit and a $115 million combined Northeast/Hawaii limit from 2023 disaster bonds issued by a special purpose vehicle, the Citrus Re Ltd., which provides multi-year reinsurance protection.
Ernie Garateix the CEO of Heritage said, “We are pleased to announce the completion and terms of our 2023-2024 CAT XOL reinsurance program. We appreciate the continued support of our reinsurance partners and their recognition of our efforts to provide adequate coverage for the market. We expect to continue to increase rates and take underwriting actions within legal guidelines to ensure long-term profitability in the markets we serve. We will continue to looking for profitable opportunities while maintaining a balanced portfolio.”
Both bonds received approvals above the initial target limits along with the lower end of the pricing guide. In addition to the $100 million limit on the 2022 in-force Northeast-only catastrophe bond it already has.
The first event consolidated loss of continuity for the Southeast and Hawaii of approximately $40 million, and $30 million in the Northeast. Individual insurance companies are less likely to use Heritage’s captive reinsurance company, Osprey Re. Florida Hurricane Catastrophe Fund participation is at 90%, consistent with last year’s program. The entire program is based on indemnity, with no parametric cover.
The program includes the use of the Reinsurance to Assist Policyholders (RAP) program created by the Florida legislature in 2022. It is expected to provide a limit of approximately $71 million at no cost to the Company. The RAP program was deferred last year because the company’s 2022-2023 placement was completed without this program.
Premiums-in-force at Heritage stood at $1.3 billion in Q1 2023 representing a 10.9% increase from Q1 2022 due to continued proactive underwriting and rate actions, despite a reduction in policy numbers of approx. 50,000 policies.
Significant rating actions resulted in an increase in average premium per policy across the entire book of business of 5.9% from Q4 2022, and 21.9% in Q1 2022.