"We are pleased with the breadth of our catastrophe reinsurance program," said Gene Mergelmeyer, president and chief executive officer of Assurant Specialty Property. "We were able to secure higher levels of coverage to support our significant growth, while maintaining storm deductibles comparable to last year and under more favorable pricing. This year, we also initiated a deliberate long term strategy to secure a small portion of our per occurrence CAT reinsurance coverage on a two-year term basis to help ensure capacity and level pricing over time."
In structuring the property catastrophe reinsurance program, Assurant applies a disciplined risk management process including utilizing multiple catastrophe models to evaluate the estimated loss potential from various perils, analyzing the geographic spread of risk and quantifying the reinsurance cost relative to the coverage provided, as well as the credit quality, financial strength and claims paying ability of the reinsurers.
Assurant utilizes CAT reinsurance primarily for its Assurant Specialty Property business to protect the company's capital base from catastrophe risk for our customers and to lessen the variable effect of catastrophes on earnings for shareholders.
Effective for both Jan. 1 and June 1, 2008, Assurant has placed its property CAT reinsurance program with over 40 highly rated reinsurers.
There are three parts of the reinsurance program:
First, the Florida Hurricane Catastrophe Fund ("FHCF"), including the Temporary Increase in Coverage Limit ("TICL"), provides Florida-specific coverage. For Florida hurricanes, the FHCF/TICL program is utilized before Assurant's per occurrence property CAT reinsurance program. Retentions and limits are estimated based on the individual Assurant legal entities that participate in the FHCF/TICL program. In aggregate, the 2008 coverage provides for a $639 million catastrophic occurrence with a $515 million limit after a combined retention of $124 million.
Second, Assurant purchased per occurrence CAT reinsurance coverage for a $770 million catastrophic occurrence with a $675.25 million limit in excess of a $94.75 million retention. Included in this cover is an automatic reinstatement for a second occurrence under terms similar to the first occurrence. The majority of the program has been placed with a one year term, and a small portion has been placed with a two year term.
Third, the company has placed aggregate hurricane coverage as protection for multiple storms with a limit of $90 million in excess of $80 million retention. Losses in excess of $10 million per occurrence are eligible and no one event can contribute more than $40 million.