Nephila Capital’s MGA Velocity Risk pauses new Florida homeowners business

Velocity Risk Underwriters LLC, the managing general agency (MGA) operation of reinsurance, catastrophe, climate and weather risk-linked investment manager Nephila Capital, has paused accepting new homeowners business in Florida, citing a desire to control its rapidly grown portfolio in the State, we’ve learned.

Please note: We’ve updated this article to clarify that it is only homeowners business that Velocity Risk is pausing and the company remains very active in all commercial lines in Florida.

This isn’t an exit from the Florida market. Rather, having grown significantly in Florida’s property insurance market in recent years, in market conditions that Velocity says have been “challenging”, the managing general agent (MGA) wants to control future growth and so will not accept new homeowners business for the rest of this year.

Nephila Capital launched its MGA Velocity back in 2015, as the insurance-linked securities (ILS) investment fund manager sought to establish efficient routes to access catastrophe exposed property risks more directly.

Velocity was constructed to provide an efficient pipeline to give Nephila Capital more direct access to risk and a more efficient way to deploy its reinsurance capital to support this new primary business.

Something that proved particularly effective in the Florida market, where Velocity has grown its portfolio rapidly.

Velocity said that its customer base has grown “beyond expectations” in Florida, leading it to the decision to control future growth across its personal lines products for the rest of this year.

The MGA said that the decision was not taken lightly and that Velocity remains committed to the Florida marketplace.

But in order to support homeowners and agents in Florida, Velocity feels it necessary to pause new business to manage its portfolio responsibly, while avoiding market conditions that it calls “unstable”.

As well as not providing new quotes for its homeowners products, Velocity will also non-renew its Flex property insurance product for older homes, or smaller limit policies, we understand.

Velocity Risk continues to offer its commercial lines products in the State.

This move appears to be partly due to Velocity’s homeowners growth in Florida and also partly due to market conditions, with the Florida property insurance market remaining severely challenged by a range of issues.

This has led to other carriers pulling-back on the state, so it is perhaps no surprise to see Nephila Capital’s Velocity MGA becoming more selective and cautious about over-exposure.

It may also signal the parent, ILS investments manager Nephila, also considering its own share of the Florida reinsurance market and how that contributes to any concentration of exposure to the State and to the still challenged insurance marketplace.