On 13 September 2008, Hurricane Ike made landfall at Galveston on the Texas coast with a track some 240 miles wide. A combination of unusual climatic conditions and flat topography meant that it maintained speed as it hit Houston and continued northwards. Total insured losses are estimated to be over US$20billion, making Ike the third most costly hurricane in history (after Katrina (2005) and Andrew (1992)), the most expensive to the state of Texas and thus, the third largest natural catastrophe payout for Amlin.

Our strategy for US catastrophe reinsurance is to provide cover on a regional or single state exposure rather than to target large nationwide accounts. However, in the current economic climate, our small local and regional customers in Texas are more vulnerable to an event of Ike’s magnitude which affects every aspect of their business. They are increasingly reliant on reinsurance, both to protect their capital and mitigate severe strains on their cash flow. The standard Lloyd’s market settlement procedure is for the cedant to adjust the loss, collate the information, sign a proof of loss and submit this to underwriters for settlement.

After a major hurricane however, the wind damage and consequent business interruption claims take time to verify so Lloyd’s underwriters will request projected payment patterns from clients and advance settlements against these schedules. This enables local insurance companies to begin settling claims soon after the event, particularly for temporary living expense costs.

For Hurricane Ike, Amlin went a step further to ensure that our clients were in receipt of funds at the earliest opportunity. We set up a facility to enable companies to draw cash directly from Amlin, based on modelled losses and outside the normal Lloyd’s payment methods. This mechanism enabled long-standing Amlin clients such as National Lloyds Insurance Company of Waco, Texas, to manage their cash flow without having to liquidate assets in the current poor market conditions. President and CEO, Greg Vanek commented,

“Amlin is a long-standing partner with National Lloyds Insurance Company, primarily due to their ability to respond when needed. Post Ike, our focus was on helping our homeowners get back into their properties while protecting the strong credit rating which is vital to the sustainability of our business. Amlin’s drawdown facility has really benefited us on both counts.”

The Amlin facility was achieved through close cooperation with the reinsurance intermediary and capital advisor, Aon Benfield, and effective liaison between the underwriting, modelling and claims teams. Steven Clark of Aon Benfield explained;

“Amlin’s facility was made possible because of the accuracy of their exposure and loss modelling. They have gone the extra mile with this pioneering approach and have set the standard for the Lloyd’s market.”