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UPC Insurance cuts net Q3 cat loss after reinsurance changes

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United Insurance holdings (UPC Insurance) reported net catastrophe losses of $37.0mn in Q3 2021, down from $140.0mn for the prior-year quarter, after action to significantly reduce gross and net catastrophe exposure during the past year led to a “materially reduced” hurricane loss.

The company did not disclose gross or ceded Ida losses, but said reinsurers had benefitted from windstorm reserve releases on prior year events. Its reinsurance recoverable figure rose by over $424mn from the half-year mark to reach $1.35bn at 30 September.

But its net loss after tax of $14.3mn for the quarter improved from $73.9mn owing to lower net retained losses from named windstorms.

UPC added that “exposure reduction and renewal rate increases continue to trend favourably producing more premium relative to risk.”

The company cut back its excess-of-loss reinsurance limit at this year’s Florida renewal, but notably lowered its retention to $15mn from $46mn.

Ceded earned premiums were $200.1mn, up by 21% or $34.9mn primarily due to more business being ceded by way of quota share reinsurance programs.

It ceded 57% of total premiums in the quarter, up from 47% a year earlier, after adding American Coastal into its 23% quota share cover and after completing a renewal rights deal with HCI to offload its northeast book which involved initial quota share coverage.

Net adverse reserve development was $1.9mn compared to favourable development of $4.2mn in Q3 2020.

Brad Martz, president and CFO, said on the earnings call: “There were a few older catastrophe events that we saw some strange development on, so we decided to do a little bit of strengthening.”

He added that “all reserves for the named windstorms last year still look good. In fact, we have some redundancy there, but that redundancy benefited the reinsurers.”

UPC said that core earnings, excluding named storm losses, fell by 40% to $9.0mn driven primarily by reinsurance costs.

Additionally, the carrier noted that a new law introduced by Florida in July was showing early indications of success.

Martz said: “Since peaking in June, new lawsuits have declined significantly, which is partially offset by an increase in claims following the new pre-suit notice requirements of Senate Bill 76. It's still too early to say whether or not Senate Bill 76 will have a positive impact on our loss costs or our loss reserves, but the early indications of successful speed resolution are encouraging.”

In a presentation, UPC said it expected a return to profits in the fourth quarter.

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