Description of Reinsurance
Effective: August 31, 2009 - May 31, 2010
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.
60% 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 60% Quota Share Reinsurance. This means that 60% of each dollar we receive in premiums is shared with quota share reinsurers who in turn cover 60% 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 $47M of catastrophe protection in excess of $5M retention applied to the 60% quota share. This means that if a catastrophic event occurs, Security First Insurance will need to pay only 40% of $5M to meet the retention needed to receive reinsurance recoveries of $47M. Quota share reinsurers will cover the other 60%. Additional protection in excess of $6.7M is provided by the Limited Apportionment Buydown Layer of the FHCF in the amount of $10M.
FHCF Layer + FHCF Temporary Increase in Coverage Limit (TICL) - Protection beyond FHCF
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 and the TICL Layer is optional coverage. FHCF provides 90% of $203.7M of loss coverage in excess of $46.4M retention. This means that a loss must reach $46.4M 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.
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 = 40% of $5M. Retention for third and fourth events = 40% 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.