Universal cedes $23.7m of Irma loss creep & $915.2m for Ian during Q3

During the third-quarter of the year, Universal Insurance Holdings, the Florida headquartered primary insurance carrier, continued to experience loss creep from 2017’s hurricane Irma, ceding additional losses through to reinsurance sources.

To be clear, it’s uncertain whether the additional losses from hurricane Irma, which amounted to adverse prior years’ reserve development of $26.4 million gross, $23.7 million of which was ceded, has actually hit private reinsurance providers, or just Universal’s other arrangements such as its captive reinsurance structure.

But, either way, the continuation of loss creep from hurricane Irma in 2017 is another signal of the challenging and dysfunctional insurance market environment in Florida, but also perhaps a cautionary warning when it comes to the much more recent hurricane Ian.

The good news is that the loss creep appears to be slowing, as a year earlier in Q3 2021, Universal had ceded hurricane losses of $76.4 million, which were largely from 2017’s Irma.

So far in the first nine months of 2022, Universal has experienced a gross reserve development on its hurricane Irma losses of $76.2 million, of which $69.2 million was ceded to reinsurance sources.

Ceded hurricane-related loss creep in Q3 2021 was $278.9 million, with Irma again the main driver, although Sally, Michael and Matthew also contributed.

During Q3 2022, Universal reported that it has ceded a total of $938.9 million in losses and loss adjustment expenses to its reinsurance capital sources, which is actually slightly down on the prior year’s just over $1 billion, despite hurricane Ian occurring this year.

The insurer breaks that down into the $23.7 million of loss creep from 2017’s hurricane Irma, plus over $915 million in losses ceded from current quarter events, which we believe is almost entirely related to hurricane Ian’s impact.

The industry will be seeing losses continue to creep from hurricane Irma, now over five year’s after the storm, and hoping a similar scenario does not evolve out of the post-Ian loss recovery.

For insurance-linked securities (ILS) and catastrophe bond funds and investors, who will be hoping to have already marked-in the total Ian loss and perhaps more, the spectre of losses creeping is something they will desperately seek to avoid, as any Irma-like scenario with Ian would be another factor that dents ILS investor confidence.