By Michael Loney

May 9 - (The Insurer) - American Coastal Insurance Corporation’s catastrophe reinsurance program effective June 1 is 100% placed other than a new top layer, which if fully placed would lead to a 16% increase in the first event limit and a 32% increase in aggregate protection.

On an investor call on Thursday, CEO Bradford Martz said the core catastrophe reinsurance program renewal effective June 1, 2025 is now 100% placed except for a new top layer that was recently firm ordered to the market and is in the process of being finalized.

“Assuming we end up placing 100% of that top layer, that would bring our estimated first event limit up approximately 16% from the $1.16 billion last year to approximately $1.35 billion this year,” he said.

Martz added: “Our aggregate protection from multiple events is also expected to increase pretty significantly, about 32% year-over-year, given the new drop-down features of the two top layers.”

ACIC is buying more protection this year because of both exposure growth and a more conservative view of hurricane risk.

“Last year, we disclosed our program exhausted at roughly the 208-year return time using an equal blend of AIR version 10 and RMS version 22,” Martz said. “And if you use that same model view on our expected renewal this year, the exhaustion point increases close to the 250-year return time.”

The first event retention is expected to increase from $20.5 million last year to $29.75 million this year, but would be similar to last year as a percentage of stockholders' equity.

For three full retention events, ACIC expects to retain $52 million, up from $46.5 million last year but down as a percentage of equity.

“We are extremely grateful for the broad support we received this year from our reinsurance partners and the risk-adjusted reinsurance rate decrease estimated at approximately 12% is consistent with the rate decreases we're currently sharing with our policyholders,” Martz said.

The risk-adjusted rate decreases varied by layer between 10% and 22% with the first layer flat because of Hurricane Milton, he added.

Martz was speaking after St Petersburg, Florida-based ACIC reported core income of $20.7 million for the quarter, down from $24.4 million in the prior year period. The decrease was the result of higher policy acquisition costs $(PAC)$ due to lower ceding commission income.

This was offset by lower ceded earned premiums resulting from the step down of its 40% gross catastrophe quota share effective June 2023 to 20% effective June 2024.

The combined ratio deteriorated 11.8 points to 65.0% from 53.2% in Q1 2024 due to higher PAC, while the underlying combined ratio worsened 15.3 points to 68.2%.

On the investor call, Martz said that the external quota share will drop further to 15% from June 1, 2025 to May 31, 2026, “and ultimately I think it could go lower”.

“I think that's something we will take into account as well as the broad support provided by Arch across all our layers and all our programs,” he said.

ACIC is also increasing its internal quota share with its captive from 30% to 45%.