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FNHC > SEC Filings for FNHC > Form 8-K on 1-Jul-2013All Recent SEC Filings

Show all filings for FEDERATED NATIONAL HOLDING CO

Form 8-K for FEDERATED NATIONAL HOLDING CO


1-Jul-2013

Entry into a Material Definitive Agreement


Item 1.01 Entry into a Material Definitive Agreement.

2013-2014 Excess of Loss Reinsurance Treaties

Federated National Holding Company (the "Company," "we" or "us"), through its wholly owned subsidiary, Federated National Insurance Company ("Federated National"), has agreed upon the terms of its excess of loss catastrophe reinsurance treaties for the 2013 - 2014 hurricane season. These treaties are designed to reimburse Federated National for property losses under its homeowners' insurance policies resulting from covered events in the State of Florida, the only state where Federated National is currently writing property insurance at this time. We utilize reinsurance to reduce exposure to catastrophic risk and to help manage capital, while lessening earnings volatility and improving shareholder return, and to support the required statutory surplus requirements. Our catastrophe reinsurance program has been designed to coordinate coverage provided under various treaties with various retentions and limits.

Our private market excess of loss treaties have a term of one year beginning July 1, 2013 continuing through June 30, 2014 and all layers with reinstatements have prepaid automatic reinstatement protection. These treaties are with reinsurers that currently have an A.M. Best Company ("AM Best") or Standard & Poors rating of A- or better with the exception of one fully collateralized participant rated NR by AM Best.

A total estimated cost of $54.3 million to the Company is comprised of approximately $36.1 million for the herein referenced private reinsurance products including the prepaid automatic premium reinstatement protection along with approximately $18.2 million payable to the Florida Hurricane Catastrophe Fund. The combination of private and FHCF reinsurance treaties will afford us with approximately $466.9 million of aggregate coverage with maximum first event coverage totaling approximately $349.6 million. Our retention in connection with the first two covered events is $7.0 million for each event.

The cost and amounts of reinsurance are based on management's current analysis of Federated National's exposure to catastrophic risk. Our data will be subjected to exposure level analysis as of various dates during the period ending December 31, 2013. This analysis of our exposure level in relation to the total exposures to the FHCF and excess of loss treaties may produce changes in retentions, limits and reinsurance premiums as a result of increases or decreases in our exposure level.


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