Porch Group files application to form a reciprocal insurance exchange

Porch Group announced that its insurance business, Homeowners of America, has filed an application to form and license a Texas reciprocal insurance exchange with the Texas Department of Insurance. If approved and fully implemented by Porch, its insurance underwriting business would be conducted exclusively through the Reciprocal.

The formation of the Reciprocal is an initial step in Porch’s long-term strategy to reduce its exposure to earnings volatility from its Insurance segment by mitigating direct exposure to insurance claims and weather events. The Reciprocal may also help to reduce the impact of a challenging reinsurance market that has both less capacity and higher prices.

The day-to-day operations of the Reciprocal would be managed by a subsidiary of Porch, which would receive ongoing fees for originating, underwriting and processing claims on behalf of the Reciprocal.

The launch of the Reciprocal remains subject to review and approval by the TDI, which is not expected before Q3 2023. Formation of the reciprocal is subject to ongoing Porch and regulatory review in context of broader capital and operating environment and the decision to proceed remains within the company’s discretion.

Porch Group recently shared its 2022 results. The group, which has several activities, reported a net loss of ~$156.5 million for the year. In terms of insurance activities, weather events caused higher-than-expected fourth quarter claims, adding approximately $7 million of additional costs in the quarter, including Winter Storm Elliott. HOA has ~389k policies and the company plans to not renew 37k “higher risk” policies.