Business Context and Reporting Period
This Form 8-K, filed on June 17, 2022, reports events occurring on June 1, 2022, for United Insurance Holdings Corp. (UIHC), trading under the symbol UIHC. The filing details the renewal of catastrophe reinsurance programs for its insurance subsidiaries, including American Coastal Insurance Company, Family Security Insurance Company, Inc., Interboro Insurance Company, Journey Insurance Company, and United Property & Casualty Insurance Company.
Key Financial Metrics and Program Details
The filing focuses on reinsurance limits, retentions, and costs rather than standard operating financials like revenue or net income.
- Total Reinsurance Cost: Approximately $374.7 million for the 2022/23 catastrophe excess of loss programs (excluding potential reinstatement premiums).
- Cost Ratio: 32.7% of the March 31, 2022, in-force premium in covered states.
- Core CAT Limit: $2.524 billion in aggregate occurrence-based limits.
- Interboro Limit: $187.6 million per occurrence.
- Quota Share Cession: Total rate of 18.0% for the 2022 wind season (10.0% renewed rate plus 8.0% existing rate).
Material Changes Versus Prior Period
Compared to the 2021/22 program, the 2022/23 renewal reflects the following material changes:
- Cost Reduction: Total catastrophe excess of loss program costs decreased by $36.4 million (8.9%).
- Core CAT Limit Decrease: Aggregate limits decreased by $407.0 million (13.9%) from $2.931 billion to $2.524 billion.
- Structure Change: The Core CAT program shifted from a cascading aggregate structure to an occurrence-based structure.
- Retention Increase: First and second event retention for the Core CAT program increased by $1.4 million (9.3%) to $16.4 million per occurrence.
- Interboro Limit Decrease: Per occurrence limits decreased by $24.4 million (11.5%) and aggregate limits decreased by $28.8 million (10.5%).
- Quota Share Reduction: The renewed cession rate decreased by 5 percentage points to 10.0% from the expiring 15.0% rate.
Outlook, Risks, and Contingencies
Management notes that the reinsurance coverage is sufficient for approximately a 1-in-130-year event, or a 1-in-100-year event followed by a 1-in-50-year event in the same season. The filing includes forward-looking statements regarding attachment points, total coverage, and costs, which are subject to estimates and assumptions. A key contingency identified is the potential for actual costs and coverage to differ materially based on reinsurers' capacity to pay claims and adjustment provisions within private reinsurance agreements.
Investor Verification Checklist
- Verify the impact of the 13.9% reduction in Core CAT limits on the company's retained risk exposure.
- Confirm the implications of the shift from a cascading aggregate structure to an occurrence-based structure for capital allocation.
- Review the specific terms of the Florida Hurricane Catastrophe Fund (FHCF) reimbursement contracts, which provide approximately $1.4 billion of Florida-only coverage.
- Assess the effect of the reduced quota share cession rate (from 15.0% to 10.0%) on net premium retention and underwriting results.
- Monitor the potential for reinstatement premiums, which are excluded from the reported $374.7 million cost figure.