Universal expands underwriting to include Illinois homeowners business

Expansive Florida headquartered primary insurer Universal Insurance Holdings has entered another U.S. state, beginning to underwrite homeowners risks in Illinois, taking the number of states it writes property risks in to eighteen.

Universal began as a solely Florida focused underwriting business, with its Universal Property & Casualty Insurance Corporation writing wind exposed business and taking risk out of the predecessor to Florida Citizens.

A gradual expansion began around 2008, when Universal started to expand its underwriting to regions such as the Carolina’s, Georgia and Hawaii,

The expansion continued through beyond 2010, as Universal’s scale grew and its appetite for diversifying sources of U.S. property insurance risk increased with it.

Leading up to 2019 when Universal has added its eighteenth state, with Illinois property risks now set to be added to the portfolio.

“We are thrilled to have written our first policy in Illinois, and look forward to creating long standing relationships and serving consumers and independent agents in the state.  We continue to execute on our strategic priorities, expand our addressable market and diversify our book of business to strengthen our foundation for the future,” explained Universal Insurance Holdings, Inc. Chief Operating Officer Stephen J. Donaghy.

With the June reinsurance renewals approaching fast and Universal a major buyer, the continued expansion of the insurers’ reach could mean a larger overall program will be required, although the company is bound to find some synergies given the growing ability to diversify areas of its book against one another.

In addition economies of scale matter when buying reinsurance, but still the insurers such as Universal that have broken out of the largely wind exposed southern and eastern coastlines, as well as Florida of course, are now set to bring even more risk premium through to the reinsurance market, with a share no doubt falling to insurance-linked securities (ILS) funds.

Universal is already a heavy user of collateralized reinsurance protection, with ILS fund managers featuring in its last renewal in June 2018.

At that renewal, Universal purchased a $3 billion tower of reinsurance, with Nephila Capital one of the lead markets and other ILS players also participating.

The use of capital markets backed reinsurance has been as prevalent at Universal as at the other Florida specialist property insurers, but as these companies expand their reach their need for reinsurance is both growing and also changing at the same time.

Illinois is hardly a tropical storm or hurricane exposed state, but it is exposed to its own severe weather and winter storm related perils, meaning Universal will require catastrophe reinsurance for the portfolio it underwrites in the state.

As these primary insurers that began life in Florida expand the ILS market stands to gain access to more risk and more diversified business from these companies.

With strong relationships with insurers like Universal already created, through the support shown for their reinsurance needs from the start, ILS funds managers should find opportunities to deepen these relationships as the expansion continues.

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