Universal buys $2.4bn reinsurance tower, with Nephila again among key markets

Universal Insurance Holdings, Inc. has purchased first-event catastrophe reinsurance coverage of up to $2.4 billion, down from the previous year’s just over $2.8 billion, citing no material changes to reinsurance partners and ILS manager Nephila Capital again named as a significant market for the company.

For its subsidiary firms Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APCIC), Universal has set the top of its combined reinsurance tower for a single All States (including Florida) event at $2.404 billion for the 2024 to 2025 year.

A year ago, that was set at $2.831 billion, which was also down from over $3.1 billion of reinsurance needed in the previous year.

While Universal’s business has fluctuated in size somewhat, there are other considerations like the changes to state-backed reinsurance layers such as Florida’s RAP and FORA to consider in the mix, all of which drove resulted in Universal’s “demand for private market capacity increasing significantly,” the insurer explained.

UPCIC’s in force wind-covered policy count in Florida declined by 25,266 up to the end of March, which drove a year over year reduction to the top end of its first event reinsurance tower, the company said.

Notably for our readers, Universal opted to renew an expiring $150 million of catastrophe bond coverage (the Cosaint deal) in the traditional reinsurance market this year, marking a departure in strategy versus many other Floridians that have bought more cat bond cover in 2024.

Universal noted that its biggest reinsurance providers in 2024 were Nephila Capital, Markel, RenaissanceRe, Munich Re, Chubb Tempest Re, Ariel Re, Everest Re and Lloyd’s of London syndicates, so it’s clear ILS capital remains a major component of the tower overall.

“We are pleased to announce the completion of the 2024-2025 reinsurance program for both of our insurance companies,” explained Matthew J. Palmieri, Chief Risk Officer. “Reinsurance serves as the fulcrum of our insurance entities’ ability to absorb multiple catastrophic events in a given year, protecting policyholders and allowing operations to continue smoothly. For this renewal, we approached the market with considerably more private market catastrophe capacity demand and the Company executed efficiently with our long-standing reinsurance partners ahead of the upcoming 2024 Atlantic Hurricane Season. We also added new multi-year coverage extending through the 2025-2026 reinsurance period in the process.”

Universal also noted that $1.023 billion of its reinsurance tower will automatically reinstate to provide some multi-event protection, which is up by $177 million in aggregate limit that is available for subsequent events compared to a year earlier.

$240 million of catastrophe reinsurance provides multi-year coverage into the 2025-2026 treaty year, $165 million below the Florida Hurricane Catastrophe Fund and $75 million above it.

The combined first event retention for a loss in all states including Florida is unchanged from the prior year at $45 million.

Universal said that the total cost of its 2024-2025 catastrophe reinsurance program for UPCIC and APPCIC is projected to be around 33% of estimated direct premiums earned for the 12-month treaty period, up from an estimated 31.8% a year earlier.

That likely reflects the increased private market reinsurance limit needed in 2024, but the participation of third-party capital across its reinsurance panel will have helped in ensuring capital efficiency at this renewal.