Reinsurance, catastrophe and weather risk-linked investment fund manager Nephila Capital is set to benefit from a new source of Texas wind insurance risk, as its managing general agency (MGA), Velocity Risk Underwriters LLC. positions itself to take on ex-TWIA homeowners policies.
Nephila Capital has been leveraging its Velocity MGA as an intermediary to source portfolios of catastrophe exposed insurance business, which can then be backed by Nephila fund sourced reinsurance capital.
Last week, Velocity Risk Underwriters announced an expansion into Texas, where it will be underwriting coastal wind-only homeowners insurance policies, targeting the depopulation process of the Texas Windstorm Insurance Association (TWIA).
Policyholders will be offered options to shift away from TWIA for their homeowners insurance and Velocity will be one of the companies available for them to elect to transfer to.
Velocity highlighted that it is one of the few A.M. Best “A” rated homeowners programs in Texas and the only A.M. Best “A” rated product to existing TWIA customers, working alongside regular Nephila fronting partner State National Companies in the state.
“We’re proud to bring the people of Texas security and peace of mind, and look forward to a long-term opportunity in the Texas insurance marketplace. With additional homeowners, rental, and secondary home products coming out early next year from Velocity, we could not be more excited about what lies ahead for agents, and customers of coastal Texas,” commented Phil Bowie, CEO of Velocity.
The TWIA depopulation process will see thousands of policyholders offered the chance to move back to a private market insurer, through a clearinghouse process similar to the one utilised by Florida Citizens. It’s an opportune moment for insurers looking to gain a foothold in catastrophe exposed regions of Texas and so for Velocity and ultimately Nephila is a chance to source new risks.
Velocity already insures coastal homeowner policies in Connecticut and Florida, as well as underwriting commercial lines insurance, largely property, in all 50 states. The risks it underwrites are typically backed by reinsurance capital from Nephila’s funds. Adding Texas sources more risk for Nephila’s platform, more directly from primary customers.
By working with this MGA set-up, Nephila Capital can source risk for its insurance-linked investment strategies more directly, ultimately enhancing the efficiency of its risk capital which backs up these ventures with reinsurance capital and likely lowering the intermediation costs inherent in the risk to capital value-chain.