Heritage lifts southeast reinsurance tower to $1.3bn, cat bonds assist

Heritage Insurance Holdings, Inc. has now finalised its catastrophe excess-of-loss reinsurance renewal for the coming year and the top of its reinsurance tower stretches to $1.3 billion, with increased protection for the southeast US, while shrinking coverage for the northeast US and Hawaii.

Year-on-year, Heritage has shifted its focus on reinsurance protection to the southeast over the northeast it seems, perhaps reflecting stronger growth in states such as Florida this year, and perhaps also a nod to the impending and expected to be active hurricane season.

For 2024, the Heritage reinsurance program provides coverage up to $1.3 billion of losses for the southeast United States, $1.1 billion for the northeast and $750 million for Hawaii.

That compares to a 2023 reinsurance renewal that provided $1.3 billion for the Northeast, $1.1 billion for the Southeast and $870 million in Hawaii.

The all indemnity based, catastrophe excess-of-loss reinsurance program for 2024, covers subsidiaries Heritage Property Casualty Insurance Company, Narragansett Bay Insurance Company and Zephyr Insurance Company for the year to end of May 2025.

This year, Heritage has more in-force catastrophe bond cover that assists it through the multi-year protection and terms they offer.

That said, the total consolidated cost of the Heritage reinsurance program for 2024 is reported to be slightly higher year-on-year at $422.3 million, compared to the $420.5 million paid a year earlier.

But, it’s notable that one change to the tower was that Heritage replaced a $70 million chunk of reinsurance that came from the Florida Reinsurance to Assist Policyholders (RAP) program in 2023, with private market coverage in 2024. So the slight increase in cost is perhaps lower than might have been anticipated with that in mind.

“We are delighted to announce the successful completion of our 2024-2025 catastrophe excess of loss reinsurance program,” explained Heritage CEO Ernie Garateix. “We value the unwavering support of our valued long-term reinsurance partners as well as new reinsurance partners and reaffirm our commitment to provide appropriate coverage for the markets we serve.

“I’m pleased to continue to place a portion of our program through capital markets using catastrophe bonds issued by Citrus Re, which provides multi-year reinsurance coverage.”

Heritage has $435 million of outstanding catastrophe bond backed reinsurance, which provides multi-year, layered protection and so assists the company when it comes to renewals, given the certainty on price and coverage terms that provides.

Heritage most recently added $100 million of named storm reinsurance for southeast states through a Citrus Re Ltd. (Series 2024-1) transaction issued in March 2024.

The carrier also has $120 million of northeast only named storm reinsurance limit and a shared $115 million of northeast and Hawaii named storm limit through its May 2023 issuance Citrus Re Ltd. (Series 2023-1).

In addition, $100 million of northeast only reinsurance from the Citrus Re Ltd. (Series 2022-1) cat bond is also available for the coming hurricane season.

The retention on the Heritage reinsurance program is approximately $40 million for the southeast and Hawaii and $32 million for the northeast for 2024, with the northeast up slightly from the $30 million retention it had a year ago.

Once again, Heritage can use its captive reinsurance vehicle Osprey Re to buy-down the retention and expand the program coverage as well.

In terms of the state backed reinsurance, Heritage opted for a 90% Florida Hurricane Catastrophe Fund participation, which was consistent with the prior year.

As Heritage continues on its expansion plan, to become an increasingly super-regional property and casualty insurance carrier, it’s encouraging to see the company continuing to place the catastrophe bond market at the heart of its reinsurance arrangements and we should expect more cat bonds to be sponsored next year, particularly with its 2022 issuance set to mature prior to the 2025 hurricane season.

You can read about every catastrophe bond Heritage has ever sponsored in the Artemis Deal Directory, where you can filter the list by sponsor.