) announced its 2012 comprehensive catastrophe (CAT) reinsurance
program. A reinsurance agreement is a kind of reimbursement program
for an insurance company.
The 2012 CAT reinsurance program includes the following
Participation in the Florida Hurricane Catastrophe Fund (FHCF)
program has been made mandatory for insurers writing property
insurance in the state of Florida . The FHCF provides reinsurance
to about 186 residential property insurers doing business in the
state. It reimburses insurers after their hurricane-related
residential property insurance losses reach their retention
Assurant has chosen a coverage of 90% of losses, up to $465
million in excess of a $181 million retention, as FHCF is the most
cost-effective reinsurance available.
The second part of the program is on a per-occurrence basis,
which will provide protection of up to $1.5 billion in excess of
$240 million retention. This coverage will be available in five
parts or layers, with a co-participation of 5% by Assurant in the
The reinsurance agreement also includes catastrophe bonds
issuance by Ibis Re Ltd., amounting to $280 million. In order to
fund its obligations to Assurant, Ibis Re had issued catastrophe
bonds in January 2012 and April 2010.
Taking into account the fact that Florida has become a
hurricane-prone state, Assurant is opting for multiple storm
protection coverage to safeguard itself from further losses. As a
result, the company would be able to recover up to $100 million for
the second and third occurrences, even with retentions as low as
In 2012, the reinsurance program will reduce the net premiums
earned by nearly $240 million. Assurant's CAT reinsurance
agreements are part of its catastrophe management strategy, which
is intended to provide shareholders an acceptable return on the
risks assumed in its property business and to reduce variability of
earnings while providing protection to its customers.
The stock currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. Considering the fundamentals, we are
also maintaining our long-term Neutral recommendation on the
Based in New York 's financial district, Assurant competes with
Principal Financial Group Inc.
) among others.
ASSURANT INC (AIZ): Free Stock Analysis Report
CNO FINL GRP (CNO): Free Stock Analysis Report
LOEWS CORP (L): Free Stock Analysis Report
PRINCIPAL FINL (PFG): Free Stock Analysis
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