Business Context and Reporting Period
This Form 8-K, filed on June 5, 2023, by United Insurance Holdings Corp. (UIHC), reports the renewal of catastrophe reinsurance programs effective June 1, 2023, for its subsidiaries American Coastal Insurance Company (ACIC) and Interboro Insurance Company (IIC).
Key Financial Metrics and Reinsurance Structure
American Coastal Insurance Company (ACIC)
- Total Occurrence-Based Limit: Approximately $1.322 billion for 2023/24.
- Retention: Up to $10.0 million per occurrence for the first and second events.
- Reinsurance Cost: Approximately $227.5 million (excluding quota share and reinstatement premiums).
- Coverage Scope: Includes earthquake and windstorms for Florida exposure, FHCF reimbursement (90% coverage), and a 40% gross quota share cession.
Interboro Insurance Company (IIC)
- Total Occurrence-Based Limit: $82.0 million for 2023/24.
- Aggregate Limit: $114.0 million.
- Retention: $3 million per occurrence for the first and second events.
- Reinsurance Cost: Approximately $9.1 million.
Material Changes Versus Prior Period
The filing details significant reductions in coverage limits and mixed changes in costs compared to the 2022/23 program, primarily driven by the divestiture of the personal lines writer, United Property & Casualty Insurance Company (UPCIC).
- ACIC Limit Change: Decreased by $1.202 billion (47.6%) from $2.524 billion.
- ACIC Retention Change: Decreased by $6.4 million (39.0%) from $16.4 million.
- ACIC Cost Change: Increased by $52.8 million (30.3%) to $227.5 million.
- IIC Limit Change: Decreased by $105.6 million (56.3%) from $187.6 million.
- IIC Aggregate Limit Change: Decreased by $131.2 million (53.5%) from $245.2 million.
- IIC Cost Change: Decreased by $7.5 million (45.2%) to $9.1 million.
Guidance, Outlook, and Risks
Management notes that the new programs provide sufficient coverage for approximately a 1-in-167-year event for ACIC and a 1-in-130-year event for IIC. The filing includes forward-looking statements regarding attachment points, total coverage, and costs, which are subject to estimates and assumptions.
Risks and Contingencies: Actual outcomes may differ materially based on reinsurers' capacity to pay claims and adjustment provisions within private reinsurance agreements. The filing does not provide specific guidance on future revenue, profit, or cash flow beyond the reinsurance program details.
Investor Verification Checklist
- Verify the impact of the UPCIC divestiture on the company's overall risk exposure and capital requirements.
- Confirm the financial implications of the 30.3% increase in ACIC reinsurance costs despite the reduction in coverage limits.
- Review the specific terms of the 40% gross quota share cession and the credit ratings of the reinsurers (A+ or higher by AM Best).
- Assess the adequacy of the reduced retention levels ($10.0 million for ACIC, $3 million for IIC) against current catastrophe modeling.