HCI Group, Inc., an InsurTech company with operations in insurance, software development and real estate, and United Insurance Holding Corp. have reached an agreement in principle for United’s primary insurance subsidiary, United Property & Casualty Insurance Company, to transfer all its personal lines insurance business in the states of Connecticut, New Jersey, Massachusetts and Rhode Island to HCI.
The business to be transferred represents approximately $130 million of annual premiums. HCI’s insurance operations are primarily in Florida. However, it recently announced plans to expand nationwide. Under the agreement, HCI will provide 69.5% quota share reinsurance on all of United’s in-force, new and renewal policies in Connecticut, Massachusetts, New Jersey, and Rhode Island from December 31, 2020 through May 31, 2021. In exchange, HCI will pay United an allowance of $4.4 million towards already purchased catastrophe reinsurance and a provisional ceding commission of 25% of premium. That percentage could increase up to 31.5% depending on the direct loss ratio results for the reinsured business.
In addition, United and HCI will enter into a policy replacement agreement pursuant to which HCI will replace all of United’s personal lines policies in the four states. As part of the transaction, HCI will provide United 100,000 shares of HCI common stock. HCI will also pay United a cash payment of up to
$3.1 million depending on the amount of premium transitioned to HCI. In connection with the transaction, United will agree not to compete with HCI for the issuance of personal lines for homeowners business in the four states until July 1, 2024.
The transaction is subject to negotiation of definitive agreements and customary closing conditions, including receipt of all applicable regulatory approvals.
“This transaction with United is a win for both HCI and United,” said HCI Group Chairman and Chief Executive Officer Paresh Patel. “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.”