The National Security Group, Inc. Releases Update on 2020 Hurricane Losses - Seite 2

Based on our analysis of historical reporting patterns, post event model output and review of claims reported to date, we estimate our revised ultimate gross losses from Hurricane Laura to be in the range of $17,000,000 to $19,000,000. Based on our estimate of gross losses, we expect losses from Hurricane Laura to remain well below the upper limits of our catastrophe reinsurance coverage.

The Company maintains catastrophe reinsurance coverage to mitigate loss exposure from catastrophic events. With our 2020 primary catastrophe contract placement, our single event catastrophe retention remained unchanged from the prior year at $4,000,000. Also unchanged from last year, we maintain catastrophe reinsurance covering incurred losses of a single catastrophe event up to $72,500,000 beyond our retention. Our catastrophe reinsurance has one reinstatement provision for any layers eroded by an earlier event in the same calendar year subject to the same $72,500,000 upper limit.

In our 2020 contract, we also placed catastrophe aggregate coverage of $2,000,000 in excess of a $2,000,000 aggregate annual deductible with provision for one reinstatement. This additional coverage effectively lowers our second and third event retention to $2,000,000. Because we were impacted by one catastrophe event in the second quarter of 2020 that exceeded the $2,000,000 aggregate annual deductible under our catastrophe aggregate coverage, both Hurricane Laura and Hurricane Sally losses will trigger recoveries under this aggregate coverage and our maximum retention will be $2,000,000 for each event. We will also pay a $250,000 reinstatement premium on this aggregate layer.

Hurricane Delta

On October 9, 2020, Hurricane Delta made landfall near Creole, Louisiana in Cameron Parish as a category 2 storm. This was the second hurricane landfall in Cameron Parish in 2020 as Hurricane Laura made landfall less than 15 miles west in late August. Hurricane Delta had maximum sustained winds of 100 mph at landfall and was a record tenth tropical cyclone to impact the continental U.S. during the 2020 Atlantic hurricane season. While Hurricane Delta was significantly less intense compared to Hurricane Laura, we have to consider the previous impacts of Hurricane Laura in establishing our estimate of gross losses (before reinsurance recoveries) from Delta. We will establish an estimated range of gross insured losses from Hurricane Delta after we have an opportunity to review post event models and initial claim reports. Net of reinsurance recoveries, we expect pre-tax losses from Hurricane Delta to be in the range of $2,500,000 to $3,500,000. Losses from Hurricane Delta will be reflected in our fourth quarter financial results.