Speaking with us today, Bruce Lucas, the Chief Executive Officer (CEO) of full-stack homeowners property insurtech, Slide Insurance Company, explained that his firm has just been approved by the Florida regulator for what could be the largest takeout of policies from Citizens Property Insurance Corporation ever.
Lucas told Artemis and sister publication Reinsurance News, “We (Slide) were just approved for 100,000 policies out of Citizens. It’s a pretty big block of business. We have about 175,000 policies in-force now, so if we were to get the full 100,000, that’d be a pretty significant increase in the size and footprint of our company.
“This is one of the largest takeout approvals ever in Florida, if not the largest and we’re very excited about growing our footprint in Florida.”
He went on to highlight the track-record he has built in the Florida property insurance market, as well as the high-growth nature of his latest start-up carrier Slide, when we asked him why he feels the approval is for such a significant number of policies.
“The regulator did a very thorough review of everything Slide. I think it’s really three things. Me as the as the CEO and our management team, I’ve probably done more takeouts than any other CEO in Florida, if not, number one, then number two. So I really know what I’m doing on this one and have a great operating history in Florida.
“Also looking at our reinsurance tower, we purchased to the 200-year return period this year, which is an anomaly in the Florida market. As you know, we went back out in July and bought an extra $100 million in the hardest market I’ve ever seen. So it really shows our commitment to protecting the balance sheet, so that went a long way.
“I think our capital positions is very, very strong. You know, we have probably more reserve capital at the holding company than any 10 or 15 companies combined in Florida, and having that additional capacity on our balance-sheet to backstop growth was an important contributing factor to the approval.”
It’s not certain that Slide will get the full 100,000 policies from Florida Citizens, the insurer of last resort in the state, as rates have been held very low at Citizens for some years.
Right now, Citizens has applied for an 11% rate increase and Lucas feels it is critical that its policyholder rates go up, in order to allow companies like Slide to maximise their takeouts and really help the state in the depopulation of Citizens and returning risk back to the private marketplace.
Lucas explained that, “I don’t think we’re going to get 100,000, that’s just an approval number. We still have Citizens policies that almost uniformly across the board are underpriced for the market and that’s going to hamper our ability to take policies out.
“On top of that, Citizens filed for an 11% rate increase, and that has not been approved yet. If that’s not approved in the next week, to two weeks at the latest, it’s really going to hamper everybody’s ability to take policies out of Citizens in October.
“We need that rate to kind of help close the gap a little bit.”
Continuing to say, “If they get that 11% rate increase it moves a whole cohort of policies into that within 20% range and increases our ability to take policies out.
“Without the rate increase, we’ve done the analysis, there’s not a lot there that we can take.”
In fact, Lucas told us that if the Citizens rate increase isn’t approved in time, it could reduce the number of policies that Slide is effectively able to take out by as much as 70% or 80%.
He said, “The clock is really ticking on that, I would say probably by the end of next week is probably the deadline.
“They’ve been working on it, I know, quite diligently now since the rate hearing in June. So I’m optimistic that we’re going to see some movement there, but it’s outside of our control.”
Discussing Slide’s reinsurance arrangements, CEO Lucas explained that the reinsurance tower purchased at the middle of the year, along with Slide’s now two catastrophe bonds, make for ample protection.
“We have more than enough reinsurance to support the transaction,” Lucas said.
He highlighted that the takeout effective date would be October 17th, so still within the Atlantic storm season. But even so, Slide has sufficient reinsurance protection and balance-sheet capital, despite the increase in exposure this takeout would bring.
“November’s not really a risk factor,” Lucas said. “We’re talking about 10 days, 12 days in October, at the end of October.
“Obviously, we’ll be watching the weather very closely to make sure that when we make the final decision on policies we take, that there’s nothing out there.”
Taking on all of this additional policy count also brings more potential exposure to other perils than hurricane risk and Lucas highlighted that Slide will make sure its reinsurers are compensated appropriately.
“The focus once the dust settles on all this is, just making sure that we maintain good business relationships with our reinsurance panel.
“We did have some reinsurers come in on an all-perils basis on first layer, second layer, and we want to make sure that they’re getting some type of adjustment premium to compensate them for the increase in severe convective risk that we’re putting on the portfolio.
“That’s a process we launched yesterday, and that dialogue will continue with the reinsurance panel, but we want to make sure we do right by our partners,” Lucas said.
Lucas is bullish on the prospects for the Florida property insurance market, hence his firm’s appetite to grow fast, into what he feels is a rapidly improving marketplace.
“We think market conditions are radically changed since the December reforms and we think the future is very bright here,” he said.
Adding, “It’s important to note that if it weren’t for the reforms that took place in December, we wouldn’t be doing this.
“I believe in the reforms. Early evidence is that the reforms are definitely working. It’s going to take years to fully play out and we’ll see what curveball comes at us next, it is Florida after all.
“But, the reforms give me the confidence to grow into this market and provide market solutions.”
He continued to explain, “I think the state needs new capacity, without it Citizens is going to continue to grow.
“I have been a Florida-first underwriter my entire career and we think that there’s real promise in this market, between the reforms, market opportunities that are out there.
“I think Commissioner Yaworsky is really laser focused on fixing this market. I would be stunned if he did anything that would disrupt the trajectory that the market is on for growth and healing.
“So, you put all these factors together and you know, me being a fast growth CEO over my career, this is exactly why I started Slide, this was the opportunity and to get these reforms that really make the entire business plan work is the key.
“We’re still very bullish on the Florida market as a result.”
That bullish outlook means Lucas is already thinking about the next opportunity to grow Slide further and he told us that, on takeouts, “It’s likely that you’re gonna see us do some more toward the end of the year, probably November, or December.”
Going on to say that this is important, as Slide will want to maintain a balanced portfolio and there are certain blackout periods where certain policies cannot be accessed from a single takeout.
This is now the second takeout for Slide, having been approved for a 25,000 policy takeout this summer as well.
It’s clear Lucas feels there is enough attractive business in Citizens to make the takeout route a useful source of fast-growth for Slide. As long as those policies are priced at levels that make the takeout possible, and the risks attractive to assume.
We suspect Slide might be back to sponsor more catastrophe bonds, or at the least to buy a much larger reinsurance tower, over the next year, should this rapid growth continue.
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