Description of Reinsurance
Effective: June 1, 2010 - May 31, 2011
Treaty reinsurance is reinsurance for an insurance company's entire portfolio and is used in various arrangements. Security First Insurance Company has one of the most comprehensive and robust reinsurance programs in the state of Florida supported by billions of dollars in surplus. We want to be sure that after a series of catastrophic events, we’re able to take care of our customers. Our top priority...the protection, strength and stability we offer Florida families.
85% Quota Share Reinsurance
Quota share is the simplest type of reinsurance. A reinsurer agrees to reinsure a fixed proportion of every policy accepted by Security First Insurance, sharing in all losses. Security First Insurance obtains 85% Quota Share Reinsurance. This means that 85% of each dollar we receive in premiums is shared with quota share reinsurers who in turn cover 85% of claims and losses.
Net Catastrophe Excess of Loss (XOL) -
Single event protection
This type of reinsurance protects Security First Insurance against losses arising from a large catastrophe event where claims liability exceeds retention. Retention is the amount Security First Insurance needs to pay from its own funds in order to obtain reinsurance recoveries to pay claims.
Think of retention as an insurance company’s deductible. Security First Insurance’s single event protection consists of $95M of catastrophe protection in excess of $5M retention applied to the 85% quota share. This means that if a catastrophic event occurs, Security First Insurance will need to pay only 15% of $5M to meet the retention needed to receive reinsurance recoveries of up to 15% of $95M. Quota share reinsurers will cover the other 85%. Additional protection in excess of $5.4M is provided by the Limited Apportionment Buydown Layer of the FHCF in the amount of $10M.
FHCF Layer
The Florida Hurricane Catastrophe Fund (FHCF) is a tax-exempt state trust fund that reimburses insurers for a portion of their hurricane losses. The FHCF Layer is mandatory coverage. FHCF provides 90% of $194.7M of loss coverage in excess of $73.6M retention. This means that a loss must reach $73.6M or higher before FHCF begins paying Security First Insurance for their losses. The additional layers of reinsurance purchased by Security First Insurance provide protection on the portion not covered by FHCF.
Temporary Increase in Coverage Limit (TICL) - Protection beyond FHCF
This coverage replaces the TICL layer offered by the FHCF which serves to extend the FHCF coverage described above. Security First now purchases this coverage from the private reinsurance market. This reduces Security First’s reliance on the ability of the FHCF to pay claims and prepares Security First for the anticipated reduction in reinsurance available from the FHCF in coming years. The TICL Replacement layer is 90% of $91.6M.
3rd and 4th Event Excess of Loss - Multiple event protection
This coverage is designed to reduce Security First Insurance’s retention (from $5M to $2.5M) in the event of multiple catastrophic losses in a single year. Retention for first and second events = 15% of $5M. Retention for third and fourth events = 15% of $2.5M.
Reinstatement Premium Protection - Retention protection
When the Catastrophe Excess of Loss reinsurance is depleted it must be restored. Security First Insurance purchases this additional reinsurance in advance to avoid having to pay full premium to replenish Catastrophe Excess of Loss reinsurance.