EMC Insurance Group Inc. Announces Terms of Inter-Company Reinsurance Programs for Calendar Year 2016
November 03 2015 - 2:53PM
On October 29, 2015, the Inter-Company Committees of the boards of
directors of EMC Insurance Group Inc. (NASDAQ:EMCI) (the “Company”)
and Employers Mutual Casualty Company (Employers Mutual), the
Company’s parent organization, approved a change in the
inter-company reinsurance program between the Company's reinsurance
subsidiary and Employers Mutual for calendar year 2016, and also
approved a new inter-company reinsurance program between the
Company's three insurance subsidiaries in the property and casualty
insurance segment and Employers Mutual for calendar year 2016.
These reinsurance programs are intended to reduce the volatility of
the Company's quarterly results caused by catastrophe and storms
losses, and will provide protection from both the frequency and
severity of such losses. Approval by the Inter-Company Committees
is required to ensure that the terms of the agreements are fair and
equitable to both parties; however, the programs must be approved
by regulatory authorities before they become effective.
The reinsurance subsidiary's reinsurance program for 2016 will
consist of two treaties. The first is a per occurrence catastrophe
excess of loss treaty with a retention of $10 million, a limit of
$10 million, 20 percent co-participation, and no reinstatement. The
cost of this treaty will be approximately $2.0 million. The second
is an annual aggregate catastrophe excess of loss treaty with a
retention of $20 million, a limit of $100 million, and 20 percent
co-participation. The cost of this treaty will be approximately
$3.1 million. Any losses retained under the per occurrence treaty
will inure to the benefit of the aggregate treaty. Only
catastrophic events with total losses greater than $500,000 will be
subject to the terms of the aggregate treaty. The reinsurance
subsidiary will purchase additional reinsurance protections
(Industry Loss Warranties) in peak exposure territories from
external parties in which coverage is triggered when losses
experienced by the insurance industry from a catastrophic event
exceed a specified threshold (i.e., $20 billion). Any recoveries
received from external parties will reduce the amount of losses
ceded to Employers Mutual. The net cost of the external reinsurance
protection is estimated to be approximately $4 million.
The property and casualty insurance subsidiaries' reinsurance
program for 2016 will consist of two semi-annual aggregate
catastrophe excess of loss treaties. The first treaty will be
effective from January 1, 2016 through June 30, 2016, and will have
a retention of $20 million and a limit of $24 million. The cost of
this treaty will be approximately $6.3 million. The second treaty
will be effective from July 1, 2016 through December 31, 2016, and
will have a retention of $15 million and a limit of $12 million.
The cost of this treaty will be approximately $1.5 million. All
catastrophe and storm losses assumed by the property and casualty
insurance subsidiaries (net of applicable reinsurance recoveries
from external reinsurance protections purchased by the pool
participants) will be subject to the terms of these treaties, and
there is no co-participation provision.
About EMCI
EMC Insurance Group Inc. is a publicly held insurance holding
company with operations in property and casualty insurance and
reinsurance, which was formed in 1974 and became publicly held in
1982. The Company’s common stock trades on the Global Select Market
tier of the NASDAQ OMX Stock Market under the symbol EMCI.
Additional information regarding EMC Insurance Group Inc. may be
found at www.emcins.com/ir. EMCI’s parent company is Employers
Mutual Casualty Company (EMCC). EMCI and EMCC, together with their
subsidiary and affiliated companies, conduct operations under the
trade name EMC Insurance Companies.
Contact:
Steve Walsh (Investors)
515-345-2515
Lisa Hamilton (Media)
515-345-7589
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