The Company is providing certain updates to its 2020-2021 reinsurance program, which was previously described in a Form 8-K filed with the SEC on June 1, 2020 (the "Reinsurance 8-K").
FNIC’s 2020-2021 New Non-Florida Homeowners Quota Share Reinsurance
FNIC entered into a new quota-share treaty with Anchor Re, a wholly-owned Arizona captive reinsurance subsidiary of SageSure LLP (“SageSure”), the non-affiliated managing general underwriter that writes FNIC’s non-Florida homeowners business. The treaty became effective on July 1, 2020 and provides 50% quota-share reinsurance protection on in-force, new and renewal business through June 30, 2021, subject to certain limitations. The treaty arrangement is fully collateralized through Anchor Re.
This treaty supplements the existing 50% profit-sharing agreement in place with SageSure. Thus, this treaty is not expected to have any impact on the pre-tax operating results of the Company, although the components of the combined ratio will be affected by the ceding of premiums, claims and commissions. The Company expects FNIC will receive statutory surplus relief from this new quota-share treaty.
FNIC’s 2020-2021 Florida Homeowners Quota-Share Reinsurance
Benefitting from our long-term trading relationship with Swiss Re, FNIC finalized the renewal of its quota-share reinsurance program for 2020-2021 on FNIC’s Florida homeowners book of business. The program became effective on July 1, 2020 on an in-force, new and renewal basis at terms generally consistent with the 2019-2020 treaty. The treaty continues to provide protection excluding named storms, and has been initially set at 10%, which is subject to certain limitations including, but not limited to, caps on losses associated with non-named storm catastrophe losses.
2020-2021 Excess of Loss Reinsurance Program
As previously reported in the Reinsurance 8-K, the Company agreed to the terms of its excess of loss reinsurance program for 2020-2021, which covers the Company’s three insurance carriers. To supplement this program, the Company subsequently purchased additional reinsurance protection of 71.5% of $15 million excess of $10 million that reduces the second and third event retention for FNIC, MIC and Monarch National Insurance Company, on a combined basis, from $25 million to $14.3 million per event, with the Company maintaining a co-participation. The cost of the underlying layer was approximately $3.0 million, bringing the Company’s total excess of loss reinsurance spend for the 2020-2021 treaty year to $264.6 million.
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The information in Item 2.02 of this Current Report on Form 8-K is hereby intended to be furnished and, as provided in General Instruction B.2 of Form 8-K, such information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, and it shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or under the Exchange Act, whether made before or after the date hereof, except as expressly set forth by specific reference in such filing to this Current Report on Form 8-K.