CIBCEQUITY RESEARCH
October 9, 2024 Flash Research
TRISURA GROUP LTD.
Fairly Small Exposure To Hurricane Milton
Our Conclusion
Hurricane Milton is poised make landfall near the Tampa Bay area and has
potential to be a major loss event for the industry. We spoke with TSU briefly
about property exposure in the state of Florida. The company has
deliberately scaled back catastrophe-exposed programs in recent years, and
does not participate in the Florida homeowners market. There is some
degree of commercial property exposure in the state, but these policies
exclude wind. The bottom line, in or view, is that exposure to Hurricane
Milton appears fairly small. Management doesn’t see any reason for concern
regarding counterparty risk at this stage, and believes that insolvency risk (in
the most severe loss scenario) is greater for primary insurers as opposed to
reinsurers anyway.
Key Takeaways
Hurricane Milton landfall could be a major event for the industry. As of
late afternoon Tuesday, Milton is a Category 5 hurricane poised to make
landfall on Florida’s west coast – around the Tampa Bay area – late
Wednesday night or in the early hours on Thursday. It is too early for any
reliable loss estimates, with the outcome highly sensitive to landfall location
and intensity. The worst case scenario could entail a direct hit on Tampa with
Category 5 winds, but even a strong Cat 3 or Cat 4 storm passing over
Tampa and into Orlando could produce a substantial loss event for the
industry.
Trisura’s exposure is fairly small. In the U.S. fronting business, Trisura
has deliberately scaled back its catastrophe-exposed programs in recent
years. Importantly, the company does not participate in the Florida
homeowners market and doesn’t have concentrated exposure to coastal
properties. There is some degree of exposure to commercial property in the
state, but it excludes wind damage. The bottom line is that Trisura’s
exposure to Hurricane Milton appears fairly small overall.
No reason for concern regarding counterparty risk at this stage. One
potential source of concern could be the risk of insolvency for a reinsurance
counterparty driven by elevated losses stemming from an abnormally large
industry loss event. However, management suspects that insolvency risk
could be more relevant to insurers that write Florida homeowners policies on
a primary basis (as opposed to the reinsurers that partner with Trisura).
Attachment points have increased since Hurricane Ian, and primary insurers
have taken more retention risk over time. Those who have not purchased an
adequate amount of catastrophe coverage could be at risk, but these are
generally not the same counterparties that partner with Trisura’s U.S. fronting
entity.