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Bankruptcies From $62B Insurer Homeowner Property & Casualty Losses

|Includes: HCI Group, Inc. (HCI), HRTG, UIHC, UVE

Summary

Hurricane Irma bankrupts insurances companies from $62 billion in property & casualty losses

Florida insurance companies HCI, UVE, UIHC, HRTG

Insurer damage projections $38-200 billion

Investors beware.

HCI Group (HCI), Universe Insurance Holdings (UVE), United Insurance Holdings (UIHC), Heritage Insurance Holdings (HRTG) all operate insurance businesses with effectively 100% policy exposure to Florida homeowner property & casualty insurance markets. These companies will all go bankrupt with a storm that causes $62B in damages to the insured P&C market.

The table below shows the arithmetic that would cause the bankruptcy for each company and the precise homeowner property & casualty insured storm damage that would cause each company to go bankrupt. These figures are shown through simplifying the risk as: 

  1. The total value of the property insured in Florida
  2. The market share for each company in Florida Homeowner P&C market 
  3. The amount of reinsurance buffer for each company
  4. The amount assets remaining for each company after liabilities
  5. The total buffer coverage for each company before bankruptcy 
  6. The total homeowner P&C storm damage in Florida that would bankrupt the company  

Homeowner Property & Casualty (P&C) Insurance Companies with Florida Exposure Steps to Bankruptcy

$ numbers in USD millions
UVE - Universal Insurance Holdings
Total Florida property insured $99,186
Market share for Florida Homeowner P&C 5.50%
Single event reinsurance coverage $2,650
Assets remaining after liabilities  $422
Total buffer coverage before bankruptcy $3,072
Total storm damage by Irma to bankrupt  $55,855
HCI - HCI Group
Total Florida property insured $45,062
Percentage of Florida housing 3.70%
Single event reinsurance coverage $1,241
Assets remaining after liabilities  $238
Total buffer coverage before bankruptcy $1,479
Total storm damage by Irma to bankrupt  $39,973
UIHC - United Insurance Holdings
Total Florida property insured $71,776
Percentage of Florida Homeowner P&C 4%
Single event reinsurance coverage $1,928
Assets remaining after liabilities  $530
Total buffer coverage before bankruptcy $2,458
Total storm damage by Irma to bankrupt  $61,450.00
HRTG - Heritage Insurance Holdings 
Total Floriday property value $68,457
Percentage of Florida Homeowner P&C 3.80%
Single event reinsurance coverage $1,750
Assets remaining after liabilities  $365
Total buffer coverage before bankruptcy $2,115
Total storm damage by Irma to bankrupt  $55,658

So how bad will Hurricane Irma insured damages be? The table below shows projections by a number of different insurance companies and industry stakeholders. 

Hurricane Damage Projections Worst Case 
Hurricane Irma 1 in 100 Scenario $125,000 *AIR Worldwide, Karen Clark and Co. 
SwissRe Hurricane Irma Scenario 1 $200,000 *SwissRe
SwissRe Hurricane Irma Scenario 2 $80,000 *SwissRe
SwissRe Hurricane Irma Scenario 3 $50,000 *SwissRe
Private Citizen Hurricane Irma Model $46,000 *Model by Roger Pielke & Christopher Landsea
XL Group Hurricane Irma  1 in 100 Scenario  $75,000 *XL Group
Validus Hurricane Irma Scenario 1 $38,000 *Validus 
Validus Hurricane Jrma Scenario 2 $78,000 *Validus 
Average bad hurricane damage scenario $86,500

HCI Group (HCI), Universe Insurance Holdings (UVE), United Insurance Holdings (UIHC), Heritage Insurance Holdings (HRTG) all operate insurance businesses with effectively 100% policy exposure to Florida homeowner property & casualty insurance markets. These companies will all go bankrupt with a storm that causes $62B in damages to the insured P&C market.

I expect the aforementioned companies may deny payment to homeowners for losses from Hurricane Irma. 

This may happen through narrowing the homeowners windows for submitting claims, denying claims on technicalities in complex form submissions, transferring claim payments to third parties who delay payment processing to avoid full payment.

Community leaders, consumer advocates, homeowner associations, neighborhood committees, public interest groups, and attorneys will need to pay attention to these companies and how they behave in the aftermath of Hurricane Irma in order to ensure homeowners receive full compensation for damages. 

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in HCI over the next 72 hours.