Porch sees launch of reciprocal as strategy for a reinsurance hard market

Porch Group, Inc., a software company focused on services to homeowners including insurance, has launched a reciprocal insurance exchange and sees the structure as a strategy that can help reduce the impact of the current hard reinsurance market.

Porch is not the first to launch a reciprocal insurance exchange, with a number of coastal and also Florida focused homeowners insurers having gone down this route, including insurtech Kin and coastal underwriter SageSure, who are both catastrophe bond sponsors.

Porch announced today that its insurance business, Homeowners of America, has filed an application with the regulator to form and license a Texas reciprocal insurance exchange.

If approved and fully implemented, Porch said that all of its insurance underwriting business will be conducted exclusively through the reciprocal insurance exchange.

The software company said that this forms part of a “long-term strategy to reduce its exposure to earnings volatility from its Insurance segment by mitigating direct exposure to insurance claims and weather events.”

In addition, Porch said that, “The Reciprocal may also help to reduce the impact of a challenging reinsurance market that has both less capacity and higher prices.”

A reciprocal can have reinsurance efficiencies through the pooling of risks across its members, which is helping to make it an increasingly attractive structure for operating homeowners insurance businesses over the last couple of years.

It’s expected that additional reciprocal insurers will launch over the coming year, with Florida and other wind-exposed coastal states anticipated to be locations where these member-driven businesses are likely to be formed.