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Heritage expands to Georgia, Citrus cat bond exposure could too


Heritage Property & Casualty Insurance has been approved for underwriting property and casualty insurance in the state of Georgia, which now becomes another potential state for its Citrus cat bond coverage to expand to.

As Heritage has become increasingly expansive, seeking to diversify its underwriting operations by expanding outside of its home in Florida into new states in the U.S., the potential for its catastrophe bonds and other collateralised reinsurance coverage to expand also increases.

Heritage P&C has always had a stated goal of entering new markets to grow its book of homeowners and commercial property business, with its operations now actively underwriting in its home of Florida and North Carolina, and now being approved in South Carolina, Alabama, Mississippi and now Georgia. Additionally Heritage writes property insurance in Hawaii through its Zephyr subsidiary. The insurer also has an application in to expand into Massachusetts as well.

Heritage has been careful to have its series of Citrus Re catastrophe bonds structured so that they could expand in terms of coverage to include new states, as it expands its reach.

Heritage has $727.5m of outstanding cat bond based collateralised reinsurance coverage, through four transactions, most recently the Citrus Re Ltd. (Series 2016-1) the $277.5m Citrus Re Ltd. (Series 2015-1), the $50m Citrus Re Ltd. (Series 2014-2) and the $150m Citrus Re Ltd. (Series 2014-1).

The two 2014 and the 2015 Citrus Re cat bonds were structured with the ability for Heritage P&C to expand the coverage they provide to cover new operations in additional states. They all initially covered just Florida named storms, but can be expanded to cover named storm risks in other states if Heritage P&C elected to.

The 2016 Citrus Re cat bond also covers Hawaii named storms from launch as Heritage’s acquisition of Zephyr was completed close to its issuance. This cat bond also has the potential to expand to cover the new states as Heritage expands its book of U.S. named storm property insurance risks.

Heritage is also a buyer of other collateralised reinsurance coverage, so the insurance-linked securities (ILS) market and its investors will likely see more risk from the insurer ceded over the coming years as the expanded book demands it.

Of course Heritage will also benefit from the newly found diversification outside of its home state of Florida, which could result in an ability to retain a little more exposure in some states if it chooses.

Heritage Chairman & CEO Bruce Lucas stated, “We are pleased to announce our approval in Georgia, which will be our seventh state for business production. Georgia represents another great opportunity to grow our footprint as a strong regional carrier in the southeast.”

As primary insurers that began life as a Florida focused takeout player expand, the ILS market stands to gain access to more risk and more diversified books from these companies. Having built strong relationships with insurers like Heritage, by supporting their reinsurance needs from the start, ILS funds and managers should find opportunities to deepen these relationships as this expansion continues.

Also read:

Heritage reduces FHCF participation to 45% with Citrus Re 2016 cat bond.

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