High catastrophe losses led to FedNat's rate hike, which occur in the wake of hurricanes like flooding from Tropical Storm Fay that brought FEMA Public Information Officer William Lindsey and Lee County Sheriffs Officer to a flooded development. | By George Armstrong/FEMA Photo Library
FedNat plans to continue restricting its underwriting in Florida until its rates are stronger relating to higher claims and reinsurance costs and the company filed rate increases to assure this.
“Our second quarter results were impacted by a high number of severe weather events in Florida, and across the Southeast, including fourteen industry events, which included Tropical Storm Cristobal,” Michael H. Braun, FedNat’s CEO, said in the company’s Second Quarter Results 2020.
The rate hike filings were made to offset those catastrophe reinsurance costs, Ronald Jordan, FedNat chief financial officer, told Reinsurance News.
The catastrophe costs reached $48.3 million, causing Florida-based FedNat to post a second quarter net loss of $21.5 million.
Property claims continue to affect the company’s financial results, Braun said.
“While the number of AOB lawsuits continues to decline sharply, the powerful plaintiff’s bar in Florida remains diligent in finding avenues to bring litigation against insurers,” he told Reinsurance News.
But Jordan said profitability is the focus.
“We remain focused on growing profitably in our more attractive non-Florida homeowners markets and continuing to raise rates and restrict growth in Florida,” Jordan told investors on an earnings call.
FedNat’s 2021 reinsurance program provides $650 million of private reinsurance for non-Florida states, plus an additional $650 million of limit within Florida for $1.3 billion of first-event coverage in excess of $31 million, and an aggregate cover of $1.9 billion, at a total cost of $265 million.
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