Security First Insurance

Effective: June 1, 2011 - May 31, 2012

Reinsurance is insurance for an insurance company’s entire portfolio and can be purchased 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.

55% 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 55% Quota Share Reinsurance. This means that 55% of each dollar we receive in premiums is shared with quota share reinsurers who in turn cover 55% 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 must pay from its own funds in order to obtain reinsurance recoveries to pay claims. Think of retention as an
insurance company’s deductible.

Single event protection consists of $125M of catastrophe protection in excess of $5M retention applied to the 55% quota share. This means that if a catastrophic event occurs, Security First Insurance will need to pay only 45% of $5M to meet the retention needed to receive reinsurance recoveries of up to 45% of $125M. Quota share reinsurers will cover the other 55% of the retention and total loss. Protection of 100% of 20M is also available when a single event’s losses exceed 130M (5M retention and $125M single event limit). An additional $10M for each of the first two events in excess of $7M is provided by the Limited Apportionment Buydown Layer of the Florida Hurricane Catastrophe Fund (FHCF).

FHCF Layer

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 an estimated 90% of $221.9M of loss coverage in excess of $86.6M retention. This means that a loss must reach $86.6M 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 Temporary Increase in Coverage Limit (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 100% of $91.6M excess of $308.6M.

3rd and 4th Event Excess of Loss - Multiple event protection

This coverage is designed to reduce Security First Insurance’s retention (from $5M to $2M) in the event of multiple catastrophic losses in a single year. Retention for first and second events = 45% of $5M. Retention for third and fourth events = 45% of $2M if Quota Share reinsurance is available. Maximum retention without Quota Share reinsurance = 100% of $2M. This layer provides $23M in protection excess of $2M for third and fourth events. This protection is available when the loss for each of the first two events exceeds $25M.

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 after a major catastrophe.