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Insider in Full: Berkshire Hathaway writes ~$400mn line on Floridian carrier HCI’s reinsurance treaty

Berkshire Hathaway entities wrote a large, roughly $400mn reinsurance deal for Florida insurer Homeowners’ Choice (HCI Group) as part of this year’s June renewal, according to sources...

This comes as many reinsurers are heavily restricting their appetite in Florida, especially for lower-attaching reinsurance covers, creating a major capacity crunch at this year’s renewals.

As reported earlier by this publication, even the state’s stronger carriers have had a challenging renewal as programmes have come together late, while reinsurers are expecting some failures amongst the many smaller operators that are further behind in the process due to lack of capacity.

HCI Group is one of the state’s five listed insurers and operates Homeowners Choice and InsurTech-led carrier TypTap.

Last year it bought up to $967.6mn of first-event cover, including a $16mn retention for Homeowners Choice, and sourced a separate tower covering up to $452.2mn of losses for TypTap.

According to SNL data, HCI Group’s reinsurance premiums ceded in 2021 were distributed relatively evenly amongst a wide range of reinsurers, including Sompo International’s Endurance Specialty, Munich Re America, TransRe, Swiss Re America, Arch Re, Chubb Tempest Re, Lloyd’s and other carriers.

Some Berkshire Hathaway carriers, including Gen Re, also feature on the group’s list of prior providers.

The likes of Berkshire Hathaway, which writes in Florida via various subsidiaries, as well as hedge fund DE Shaw are being chased by brokers for their ability to offer chunky reinsurance sums, although various sources previously suggested Berkshire was largely still “sitting on the sidelines” up to this point.

HCI has been one of the few Florida carriers posting growth in the past year, as it picked up two blocks of business in the northeast and southeast from peer UPC last year via renewal rights deals.

It managed to turn a net profit of $7.2mn last year, as many Floridians have fallen to losses on the back of high litigation, although the firm’s profits were down from prior-year levels of closer to $27mn.

It ceded just under $200mn of premium or 35% of gross premium earned to reinsurers in 2021 and transferred around $40.4mn of losses to reinsurers the same year, according to its 2021 annual filing.

HCI declined to comment. Gen Re was approached for comment.

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