HCI & TypTap expand and re-organise catastrophe reinsurance

HCI Group Inc. and its digital insurtech company TypTap have expanded and re-organised their catastrophe reinsurance arrangements, with growth meaning a significant amount more in limit across first and second events has been purchased at the renewals.

A year ago, HCI Group expanded its catastrophe reinsurance coverage by around 31% to $1.93 billion of limit on a first and second event basis.

That was to cover both its Homeowners Choice Property & Casualty Insurance Company, Inc. subsidiary and digital insurer TypTap.

At the mid-year renewals, HCI said it has reassessed the purchasing of reinsurance and split it by company and also peril, to try and make the protection respond better to its growing needs.

All of the limit purchased will run across the June 1, 2021 through May 31, 2022 term and as well as contracts with multiple private reinsurance companies, the Florida Hurricane Catastrophe Fund also plays a key role in the towers.

The private reinsurance companies involved included Endurance Specialty Insurance Ltd., Munich Reinsurance America, Transatlantic Reinsurance Company, Swiss Reinsurance America, Arch Reinsurance Ltd., Chubb Tempest Reinsurance Ltd., various Lloyd’s syndicates, and also HCI’s own Bermuda-based reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd.

All of HCI’s private reinsurers are AM Best rated ‘A-’ or better or have fully collateralized their obligations, the company said.

For non-flood perils, HCI and TypTap have separate reinsurance coverage for Florida, but share a tower for non-flood losses outside of Florida.

For flood risks, the reinsurance tower is shared across all geographic regions.

For Homeowners Choice in Florida, HCI has purchased $967.6 million of single event cover for catastrophic losses, excluding floods, while total coverage for all occurrences is $1.33 billion, after a $16 million retention for both first and second events

Interestingly, HCI has negotiated a multi-year private reinsurance agreement that includes retrospective provisions that adjust premiums in the event losses are minimal or zero for Homeowners Choice, which would accrue back to the company in year’s with minimal cat losses it seems, a smart way to address the hardening marketplace this year.

TypTap, meanwhile, will have $452.4 million of coverage for a single event in Florida, excluding floods, while total coverage for all occurrences is $643.6 million, both after an $8 million retention for both first and second event.

For outside Florida, both Homeowners Choice and TypTap combined will have catastrophe reinsurance coverage up to $575 million for a single event, excluding flood losses, and total coverage for all occurrences of $1.14 billion, both after a $4 million retention for first and second event.

Again, the retrospective provisions for low loss year agreement has been added to this non-Florida component of the program.

For flood events, Homeowners Choice and TypTap will benefit from $60.5 million of reinsurance for a single flood loss event and total coverage for all occurrences of $87.5 million, with a $3 million first and second event retention in place.

Overall, HCI Group said that it expects to incur net reinsurance premiums ceded of approximately $207.1 million from June 1, 2021 through May 31, 2022.

That’s up considerably from the around $175 million estimate a year ago for the prior year program, representing growth and more coverage secured for the 2021-22 annual reinsurance term.