Insight and Intelligence on the London & International Insurance Markets 18 Mar 2018

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FHCF Irma loss subsides

  • Fiona Robertson and Lucy Jones 13 March 2018
  • The Florida Hurricane Catastrophe Fund (FHCF) said its losses from Hurricane Irma were expected to reach $2.04bn, less than half its previous estimate of $5bn.

    In November 2017 the state reinsurer said its share of Irma claims could fall between $3‎bn and $6bn, with a $5bn point estimate.

    The FHCF estimated ‎that industry residential losses due to Irma stood at $8.46bn at year-end 2017.

    This is also well below the earlier implied estimate of a Florida residential industry loss of roughly $13bn-$14bn, as the FHCF cover triggers above an insurance industry retention of $7bn with a rough 75:25 split between the fund's share of losses and industry co-participations.

    Of the latest total incurred loss figure, the FHCF said reported losses contributed $852mn at the end of the year while paid losses totalled $98mn.

    The fund said it had a cash balance of $15bn to pay claims.

    Its losses are well below the $11.5bn attachment point of its reinsurance programme.

    The FHCF said industry reported losses came to $6.3bn at year-end, with $3.0bn of paid losses.

    The fund said its $2.04bn Irma figure would change as more information was reported.

    Meanwhile, state-backed insurer Citizens Property Insurance now expects to make some recoveries from the FHCF, after its losses rose from initial estimates.

    But other private insurers said during the fourth quarter earnings season that they had closed high levels of claims, although Heritage's Irma loss has also risen.

    Citizens chief financial officer Jennifer Montero said at the Sifma IRLS conference in Miami that the organisation would recoup roughly $335mn from the FHCF and also claim a currently undetermined small amount from a private reinsurance layer that wrapped around the cat fund cover.

    The carrier retained $504mn of losses before private reinsurance triggered on its coastal account. Its wrap cover provided $350mn of limit above this retention, alongside its $1.297bn xs $437mn FHCF coverage.

    In September, Citizens said that it expected none of its private reinsurance programme to trigger following Hurricane Irma. However, this has changed as its losses from the storm rose upwards of $1.2bn.

    Rising loss adjustment expenses have been an issue following Irma, Montero added.

    "There are not a lot of adjusters out there, and we had to adjust our fees to compete following Hurricane Harvey," she said.

    Heritage currently estimates its ultimate loss from Irma at $560mn, which has eroded around 12.2 percent of its 2017 consolidated reinsurance coverage. In the third quarter the company had initially predicted a $388mn gross loss.

    After increasing its loss estimate, Heritage now expects to claim $104.4mn of Irma-related losses from several tranches of its Citrus Re cat bond issuances, as sister publication Trading Risk reported.

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