UIHC shifts attention to commercial insurance
United Insurance Holdings Corp (UHIC), a data-driven personal and commercial lines insurance holding company with investments in UPC Insurance and HCI Group , have reached an agreement to transfer UPC Insurance’s personal lines business in the three Southeast states of Georgia, North Carolina and South Carolina to HCI.
The transaction will enable UPC Insurance to reallocate capital from its personal lines portfolio to its commercial specialty property portfolio, which is underwritten by American Coastal Insurance Company.
Under the terms of the transaction, HCI will provide 85% quota share reinsurance on the in-force, new and renewal policies of UPC Insurance in Georgia, North Carolina and South Carolina for the period December 31, 2021 through May 31, 2022. UPC’s 15% quota share reinsurance with another reinsurer is expected to remain in place during this time period. Under the quota share arrangement, HCI will pay to UPC a provisional ceding commission of 25% of premium earned during the term of the contract that could increase up to 32% depending on the direct loss ratio results for the reinsured business. The estimated ceded earned premium for the quota share period December 31, 2021 through May 31, 2022 is $33.3 million (85% of $39.2 million). This would result in estimated net ceding commissions to UPC between $8.3 million and $10.6 million. HCI will also pay UPC a catastrophe allowance equal to 9% of premium earned estimated at $3.0 million for the quota share period December 31, 2021 through May 31, 2022.
Also as part of the transaction, UPC will grant HCI renewal rights in respect of its personal lines business in Georgia, North Carolina and South Carolina. Consideration for renewal rights includes an up-front cash payment from HCI to UPC of $3.8 million which will be adjusted based on the amount of premium transitioned to HCI, subject to a maximum of $6 million. In connection with the transaction, UPC Insurance will agree not to compete with HCI for the issuance of personal lines homeowners business in the three Southeast states until July 1, 2025.