Hippo grows XoL reinsurance limit, dials back quota share to retain more risk

Home insurtech Hippo has completed its reinsurance program renewal for 2024, expanding its excess-of-loss reinsurance protection, while dialling back its proportional cover through quota shares to retain more risk.

A year ago, Hippo’s reinsurance renewal was more quota share focused, as the company looked to align itself with risk takers and share losses and profits from nearer the ground-up.

Now, the company is looking to retain more risk, feeling that it is better able to manage the volatility in its book on its own balance-sheet, while continuing to use excess-of-loss reinsurance to cover itself against major catastrophes.

“Our reinsurance partners have affirmed their confidence in our business with improved terms for the second year in a row,” said Rick McCathron, CEO and President on the successful placement of Hippo’s 2024 reinsurance program.

He further explained that, “Our efforts to reduce exposure to weather-related volatility in our business, combined with our proactive approach to home protection, has continued to drive significant improvements in loss ratio, making the Hippo Home Insurance Program attractive to reinsurers, many of whom have been with us for multiple years.”

“The successful placement of our 2024 reinsurance program, and our decision to retain more of the non-PCS exposure and corresponding premium, on our own balance sheet reflects our growing confidence in the profitability and predictability of our underwriting results,” added CFO Stewart Ellis.

The 2024 Hippo reinsurance program continues to feature quota share cover, or proportional reinsurance treaties, but these have been dialled back.

“The decision to purchase substantially less proportional reinsurance in 2024 and retain more Hippo Home Insurance Program premium and the associated non-catastrophe attritional losses on our balance sheet reflects our expectation of continued improvement in the attritional loss ratio and essential steps taken by Hippo to lower volatility,” the company explained.

Because of this reduction in quota shares, Hippo said that it expects a smaller impact from loss participation features compared to prior treaties.

On the non-proportional, or excess-of-loss (XoL) reinsurance side, Hippo increased its purchase of this type of reinsurance, raising its per-occurrence XOL limit by 11%.

At the same time, Hippo increased the number of participating reinsurers in its XoL reinsurance tower, from 14 to 19.

The company said that, along with its existing catastrophe protections, which will include the $110m Mountain Re Ltd. (Series 2023-1) catastrophe bond that was placed for its personal and commercial lines program and fronting specialist Spinnaker, it is now “protected on the upper layers of risk up to a 1-in-250-year event.”

It’s worth noting that a year ago, Hippo had said “We are protected on the upper layers of risk beyond a 1-in-250 year event,” the difference between “up to” and “beyond” may be more excess-of-loss protection purchased lower-down, to fill out some of the cover that goes with a shrinking of the quota share protection, although we cannot be certain.

Read all of our reinsurance renewal news coverage.