1347 / Maison targets Florida market, goes for total-return

by Artemis on March 7, 2017

Catastrophe and wind exposed property insurer 1347 Property Insurance Holdings and its dedicated property underwriting insurer Maison is set to expand into the Florida homeowners and wind-only markets, a move that is certain to require additional reinsurance support.

1347 Property Insurance Holdings (1347) has conducted a strategic review, as it looks to generate higher returns from underwriting catastrophe exposed business.

Already active in Louisiana, where it began as a private insurer, as well as Texas, 1347 has now identified a move into Florida as its next strategic step.

The company looks for targeted property markets where it can generate outsized returns by underwriting catastrophe exposed business, or entering areas it deems underserved.

As a result, the strategic review identified Florida and so Maison Insurance Company has secured a Certificate of Authority from Florida’s Office of Insurance Regulation, that will allow it to underwrite Allied Lines, Homeowners Multi-Peril, and Mobile Home Multi-Peril homeowners and wind-only policies.

1347 says that takeouts from Florida Citizens could also be on its strategic roadmap, to compliment direct underwriting activities that it says will be targeted based on market conditions.

The company will also evaluate other coastal states in the U.S., as it looks for additional sources of wind and catastrophe exposed property business to underwrite.

Doug Raucy, President & CEO, commented on the expansion; “Our strategic direction leverages the core competencies we’ve cultivated in our organization. Building on the specialty focus we have had from the beginning, I am confident our plan will allow us to expand in a focused and profitable manner. I want to acknowledge the great work the PIH team delivered in securing a license in Florida. We believe our timing is right to expand our strategy to this interesting market.”

1347 says that it will approach this opportunity “while undertaking to limit downside exposure.”

That suggests a relatively high use of reinsurance capital, perhaps even the use of third-party capital as a way to more rapidly accelerate growth into Florida and other coastal states. The team behind 1347 is certainly aware of the potential to utilise capital markets capacity to augment its own balance-sheet in these efforts and it has previously expressed an interest in alternative reinsurance capital and instruments such as catastrophe bonds.

Additionally, 1347 Property Insurance Holdings announced that it would include alternative investments in its asset allocation strategy, as it seeks to enhance its investment returns. This could add a greater degree of flexibility in the use of its own capital and is an interesting move by a primary insurer, in searching for a more “total-return” across both asset and liability sides of its balance-sheet.

The insurer also wants to leverage alternative assets as a way to put excess capital to use, so when capital exceeds the amount required for underwriting alternatives could be one use for it, as long as it fits within the return on equity targets of the firm.

Any boost to investment return from alternatives will also add diversity to the portfolio, overall enhancing the insurers total-return which will allow it to be more strategic in how it deploys capacity and on which side of the balance-sheet it is put to work.

The company also announced a change to its Board, with Gordon G. Pratt stepping down and Larry G. Swets Jr. being elected Chairman of the Company’s Board.

“On behalf of myself and the partners of Fund Management Group, it’s been an honor to have been part of the creation, investment capital, and history of Maison Insurance Company and of 1347 Property Insurance Holdings,” Pratt said.

Swets added; “We thank Gordon for his many years of service to the Company. Gordon played an important role in the formation of PIH, and we value his leadership in the Company’s early years as a private and then as a public company. Gordon has been and will remain a friend to PIH.”

Kyle Cerminara, a Member of the Board of Directors of the Company and a representative of PIH’s largest shareholder, Fundamental Global Investors, LLC, added, “We are excited about the future strategic direction of PIH. We believe that PIH is very well positioned to create value for shareholders.”

1347 PIH looks to operate in as efficient manner as possible, making the most of its own capacity in regions where catastrophe exposure has led to market dislocations, or shortages of cover, in the past.

In this way its philosophy is not that dissimilar to some in the ILS market and so it would not be surprising to see the company leveraging a greater proportion of reinsurance capital, perhaps third-party capital, to strategically assist in funding its expansion and growth.

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