Business Context and Reporting Period
This Form 8-K was filed by United Insurance Holdings Corp. (also referred to as UPC Insurance) on January 27, 2016, reporting events occurring on January 26, 2016. The filing details a material definitive agreement entered into effective January 1, 2016, by the Company's wholly-owned insurance subsidiaries, United Property & Casualty Insurance Company and Family Security Insurance Company, Inc.
Key Financial Metrics and Agreement Terms
The filing does not provide standard financial metrics such as revenue, profit, cash flow, or debt levels. Instead, it outlines specific terms of a new 2016 catastrophe aggregate reinsurance program:
- Retention: The Company retains the first $15 million of aggregate catastrophe losses.
- Transfer Limit: The next $20 million of aggregate catastrophe losses is transferred to private reinsurers.
- Exclusions: Coverage excludes losses from windstorms named by the National Hurricane Center.
- Covered Perils: Winter storm, severe convective storm, tornado, and hail.
- Frequency Cap: Catastrophe losses (excluding named windstorms) are capped at $15 million unless the $20 million aggregate limit is fully exhausted.
- Severity Protection: The aggregate limit provides protection to approximately the 100-year return period. A per-occurrence limit of $15 million is supplemented by a $10 million excess layer.
- Geographic Scope: All states in which the Company writes business are covered.
Material Changes Versus Prior Period
The new 2016 agreement replaces the 2015 coverage structure, which consisted of $22 million excess of $3 million per occurrence coverage. The new structure shifts from a per-occurrence model to an aggregate program with specific retention and transfer limits for non-windstorm catastrophes.
Guidance, Outlook, and Risks
The filing contains forward-looking statements regarding the reinsurance program's attachment points, total coverage, and costs. Management notes that actual results may differ materially based on reinsurers' capacity to pay claims and adjustment provisions. The filing explicitly states that the press release attached as Exhibit 99.1 is not deemed filed for purposes of the Securities Exchange Act of 1934.
Investor Verification Checklist
- Verify the specific terms of the reinsurance agreements listed in Exhibits 10.1 and 10.2.
- Review the press release (Exhibit 99.1) for additional context on the transaction.
- Confirm the Company's exposure to named windstorms, which are explicitly excluded from this new aggregate program.
- Monitor future filings for updates on the Company's core property catastrophe excess of loss program, which attaches at $25 million and exhausts at $1.25 billion.