HCI renews $2.7bn of reinsurance limit, considers buying more for wind season

HCI Group Inc. has secured $2.7 billion in aggregate reinsurance limit for its main P&C insurance underwriting subsidiary Homeowners Choice Property & Casualty Insurance Company, Inc. subsidiary and for its digital insurtech company TypTap at the renewals.

The company has extended coverage across its business and is now also considering the use of what it terms “additional risk transfer instruments” for the coming wind season.

It’s a sign of the growth HCI has been experiencing, having secured policies from the Florida Citizens depopulation program, as well as growing its book organically as well.

HCI’s catastrophe reinsurance programs for the 2024-2025 treaty year run from June 1st 2024 through May 31st 2025 and now comprise total aggregate limit of $2.7 billion, the company said today.

Paresh Patel, HCI’s chairman and chief executive officer commented, “We appreciate the broad support we received from our valued reinsurance partners.

“HCI continues to maintain a conservative approach to its reinsurance placement. This includes securing additional limit this year to support the significant growth we have achieved over the past few months.”

Two reinsurance towers have been renewed for the HCI insurance subsidiaries, Homeowners Choice and TypTap, with Tower 1 covering all Homeowners Choice policies issued in Florida, while Tower 2 shared between TypTap and Homeowners Choice and covering all TypTap policies including Florida, as well as Homeowners Choice policies issued outside of Florida.

Similar to the prior year, HCI has a retention of $14 million for Reinsurance Tower 1 and $9 million for Reinsurance Tower 2.

HCI Group says it anticipates incurring net consolidated reinsurance premiums ceded to third parties, excluding its own internal reinsurer Claddaugh, of approximately $333.6 million this year, assuming no losses occur.

That’s up from $266.6 million in net consolidated premiums incurred from the previous year’s reinsurance towers.

Among the private reinsurers backing HCI this year are reported to be Arch Reinsurance Ltd., Chubb Tempest Reinsurance Ltd., Endurance Specialty Insurance Ltd., Everest Reinsurance Company, Hannover Ruck SE, Markel Bermuda Limited, National Liability & Fire Insurance Company, Transatlantic Reinsurance Company, various Lloyd’s syndicates, and its own Bermuda-based reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd.

The private reinsurance that has been renewed covers, in general, hurricanes, tropical storms, tornados, hailstorms, wildfires and other large events, HCI said.

Additional reinsurance, outside of these towers, was secured for Condo Owners Reciprocal Exchange (CORE), an HCI-sponsored reciprocal insurer.

Tower 1, for HCI in Florida, will provide $1.12 billion of reinsurance for catastrophic losses from a single event in the state, with total coverage for all occurrences of $1.66 billion and a retention of $14 million for the first and second events.

Tower 2, for HCI outside Florida and TypTap everywhere, provides reinsurance for $723.3 million of catastrophic losses from a single event in Florida, and up to $410.0 million from a single event outside of Florida, with total coverage for all occurrences of $1.11 billion after a retention of $9.0 million for the first and second event.

The larger towers for 2024 reflect HCI Group’s growth and its assumption of policies from Citizens in Florida, all of which is making it a reinsurance buyer of growing stature in the market.

It’s interesting to hear it continues to consider additional risk transfer and it would be interesting to see whether catastrophe bonds feature in HCI’s reinsurance arrangements in future, to help support its growing need for protection.