Florida headquartered, expansive catastrophe exposed primary property insurer United Insurance Holdings (UPC Insurance), has sold its personal lines business from the four Northeast states of Connecticut, New Jersey, Massachusetts, and Rhode Island to HCI Group.
It’s not a complete exit from the Northeast for United (UPC), as the firms United Property & Casualty Insurance Company (UPCIC) and Interboro Insurance Company, will continue to underwrite policies and servicing policyholders in New York.
The transaction sees HCI providing 69.5% quota share reinsurance on United’s (UPC) in-force, new and renewal policies in Connecticut, Massachusetts, New Jersey and Rhode Island for the period December 31st 2020 through May 31st 2021.
United’s (UPC) 30.5% quota share reinsurance with its other reinsurance partners will remain in place, the company said.
Under the new quota share reinsurance arrangement, HCI will pay United (UPC) a provisional ceding commission of 25% of premium earned during the term of the contract.
This could increase to up to 31.5%, depending on the direct loss ratio results for the reinsured business, the company explained.
The estimated ceded earned premium for the quota share reinsurance period December 31st 2020 through May 31st 2021 is $37.6 million (69.5% of $54.2 million), it further explained.
Adding that, it’s expected this will result in estimated net ceding commissions to United (UPC) of between $13.8 million and $16.3 million, including a $4.4 million catastrophe reinsurance allowance.
HCI is also set to pay United (UPC) a consideration of 100,000 shares of HCI common stock, as well as a cash payment of up to $3.1 million depending on the amount of premium transferred.
United (UPC) has also agreed not to compete with HCI for the issuance of personal lines homeowners business in the four Northeast states until July 1st 2024.
The new quota share reinsurance agreement is expected to be in-force no later than December 31st 2020.
HCI’s insurance operations are primarily in Florida at the moment, but the company had recently announced plans to expand nationwide.
United (UPC) said that the deal will enable it to better focus on expanding its specialty commercial property business and improving its statutory risk based capital position through a reduction of its operating leverage.
“This transaction with United is a win for both HCI and United,” HCI Group Chairman and Chief Executive Officer Paresh Patel explained. “It accelerates HCI’s plan to expand nationally by acquiring a seasoned book of business, established agent network and associated data. HCI has the financial strength to support and grow these new business opportunities.”