HCI renews group reinsurance, extends TypTap tower to cover growth

HCI Group Inc. has renewed its reinsurance for its main P&C insurance underwriting subsidiary Homeowners Choice Property & Casualty Insurance Company, Inc. subsidiary and for its digital insurtech company TypTap.

The reinsurance tower is relatively similar to last year for Homeowners Choice, but in a sign of the expansion of the insurtech strategy at TypTap, HCI has extended the top of its reinsurance tower considerably, which we assume is to cover the insurtech’s growth.

For 2022 into 2023, HCI said its main reinsurane counterparties were National Liability & Fire Insurance Company, Endurance Specialty Insurance Ltd., Munich Reinsurance America, Transatlantic Reinsurance Company, Swiss Reinsurance America, Arch Reinsurance Ltd., Chubb Tempest Reinsurance Ltd., Renaissance Reinsurance Ltd. and its affiliates, a number of Lloyd’s syndicates, and its own Bermuda-based reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd.

All of the private reinsurers HCI has transacted with are either AM Best rated ‘A-’ (Excellent) or better the company said, while others have have fully collateralized their obligations to the insurer, implying some ILS fund capital may have participated on a collateralized basis.

Like last year, HCI Group has renewed four separate reinsurance towers, one each for its Homeowners Choice and TypTap subsidiaries in Florida, a tower expansion states (so growth regions outside of Florida), and one for an all states flood reinsurance program.

For Homeowners Choice, the reinsurance tower provides $935.7 million of single event in Florida coverage, excluding flood. While total reinsurance coverage for all occurrences is $1.33 billion (flat with the prior year) and the retention is $14 million for both first and second event.

The Florida Hurricane Catastrophe Fund makes up 90% of $573 million in excess of a $246.7 million retention, at a total estimated cost of $41.5 million.

The private reinsurance component of the program (excluding flood coverage) cost premiums of roughly $72.6 million, assuming no losses occur during the period.

Homeowners Choice also secured a multi-year private reinsurance agreement, with retrospective provisions that adjust premiums in the event losses are minimal or zero.

The TypTap reinsurance program provides up to $637.3 million of single event catastrophic loss coverage in Florida, excluding flood. While total reinsurance coverage for all occurrences is $902.3 million, up considerably on the previous years $643.6 million. This is all after a $10 million retention for both first and second event.

The Florida Hurricane Catastrophe Fund component of the TypTap program is estimated to cover 90% of $360.8 million in excess of $155.4 million retention, all at a total estimated cost of $26.1 million.

Private reinsurance premiums paid for the TypTap tower are estimated at $60 million, assuming no losses occur during the period.

TypTap has secured a single-year reinsurance agreement that includes retrospective provisions that adjust premiums in the event losses are minimal or zero, as well.

For the so-called expansion states reinsurance program, that covers both Homeowners Choice and TypTap outside Florida, $525 million of single event reinsurance coverage has been secured. While total coverage for all occurrences is $1.03 billion, down slightly on the prior year. The expansion states retention is $10 million for both first and second event.

Premiums costs are $54.2 million, assuming no losses occur during the period for the expansion states tower and both TypTap and Homeowners Choice benefit from a single-year reinsurance agreement that includes retrospective provisions that adjust premiums in the event losses are minimal or zero.

The flood reinsurance tower, which is all states, provides provides coverage up to $60.5 million for catastrophic losses in a single event resulting from a flood, while total coverage for all occurrences is $87.5 million. and retention is $3 million for both first and second event.

Across the full year, HCI Group expects to incur net reinsurance premiums ceded of approximately $247.3 million, assuming no losses to the towers.