The commercial insurance holding company, United Insurance Holdings Corp., has reached an agreement in principle to transfer its personal insurance business in the states of Georgia, North Carolina and South Carolina to the company of HCI Group insurance.
The business acquired by HCI represents approximately $ 90 million in annual premiums.
Under the agreement, HCI will provide 85% quota share reinsurance on in-force, new and renewed policies of United Property and Casualty Insurance Company (UPC) in the tri-state for the period December 31, 2021 to May 31. . , 2022.
During this period, it is expected that the 15% quota share reinsurance arrangement between UPC and another reinsurer will remain in place.
The new agreement with UPC provides for HCI to pay an interim cession commission of 25% of the premiums earned during the term of the contract, which could rise to 32% depending on the direct loss ratio of the reinsured business.
The estimated earned premium ceded for the quota period is $ 33.3 million, or 85% of $ 39.2 million. This translates into estimated net disposal commissions to UPC of between $ 8.3 million and $ 10.6 million. In addition, HCI will pay UPC a catastrophe indemnity equal to 9% of the earned premiums estimated at $ 3 million for the quota period.
This transaction also allows UPC to grant renewal rights to HCI for its personal lines business in Georgia, North Carolina and South Carolina.
Consideration for the renewal rights includes an upfront cash payment to UPC of $ 3.8 million which will be adjusted based on the amount of premium transferred to HCI, subject to a maximum of $ 6 million.
In addition, UPC undertakes not to compete with HCI for the issuance of personal insurance contracts in the three States before July 1, 2025.
For UPC, the transaction allows it to reallocate capital from its personal lines portfolio to its rapidly growing specialty commercial property portfolio, which is underwritten by American Coastal Insurance Company.
Paresh Patel, President and CEO of HCI Group, said: âThis transaction offers another great opportunity for HCI.
âHCI is expanding its relationship with United following a successful transaction in the Northeast. This latest agreement further accelerates HCI toward its growth ambitions, expands the company’s presence in existing and new states, and brings an established agent network. HCI has the financial strength to support and develop these new business opportunities.