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22 May 2023Analysis

Heritage fully places catastrophe XOL programme for subsidiaries


Heritage Insurance Holdings has announced that it fully placed its 2023-2024 indemnity based, catastrophe excess-of-loss reinsurance program for its statutory insurance subsidiaries, Heritage Property Casualty Insurance Company, Narragansett Bay Insurance Company and Zephyr Insurance Company.

Key points of the 2023-2024 catastrophe reinsurance program include:

  • Total consolidated cost of approximately $420.5 million, accounting for 32% of March 31, 2023, premiums-in-force, one point higher than the prior year cost which accounted for 31% of March 31, 2022, premium-in-force. 
  • First event reinsurance tower exhaustion points of $1.3 billion for the Northeast, $1.1 billion in the Southeast and $870 million in Hawaii. 
  • The program includes $120 million Northeast only limit and $115 million of combined Northeast/Hawaii limit from the 2023 catastrophe bonds issued by a Bermuda-domiciled special purpose vehicle, Citrus Re, which provides multi-year reinsurance protection. Both bonds received authorizations above the initial targeted limits and at the lowest end of the pricing guidance. This is in addition to the $100 million limit of the 2022 in-force Northeast only catastrophe bond. 
  • The first event consolidated loss retention for the Southeast and Hawaii of approximately $40 million, and $30 million in the Northeast. Individual insurance companies will be less given the use of our captive reinsurance company, Osprey Re. 
  • Florida Hurricane Catastrophe Fund participation of 90%, consistent with the prior year program. 
  • The entire program is indemnity based, with no parametric covers. 
  • Includes the use of Reinsurance to Assist Policyholders (RAP) program created by the Florida legislature in 2022 and is expected to provide limit of approximately $71 million at no cost to the Company. The RAP program was deferred last year because our 2022-2023 placement was completed without this program. 

“We are pleased to announce the completion and terms of our 2023-2024 CAT XOL reinsurance program,” said Heritage chief executive Ernie Garateix. “We appreciate our reinsurance partners' continued support and their recognition of our efforts to provide the appropriate coverage for the market. We expect rates to continue to increase and will take underwriting actions within statutory guidelines to ensure long-term profitability in the markets we serve. We will continue to seek profitable opportunities while maintaining a balanced portfolio.”

Heritage's premiums-in-force of $1.3 billion as of first quarter 2023 represented a 10.9% increase from first quarter 2022 due to continued proactive underwriting and rate actions, despite a policy count reduction of approximately 50,000 policies. The significant rating actions resulted in an increase in average premium per policy throughout the book of business of 5.9% from fourth quarter 2022, and 21.9% over the first quarter 2022.