HCI Group ramps up US expansion with United Insurance deal

HCI Group has signed a deal to acquire property/casualty insurer United Insurance Holding's (UPC's) insurance business in four US states, in a move to expand its insurance operations nationwide.

The deal will see UPC's primary subsidiary transfer all of its personal lines insurance business in the states of Connecticut, New Jersey, Massachusetts and Rhode Island to HCI. It involves approximately 100,000 policies, representing about $130 million in annual premiums.

Upon completion of the deal, HCI will begin the process to receive regulatory approval to do business in the four states.

HCI will provide 69.5 percent quota share reinsurance on all of United’s policies in the four states from December 31, 2020 to May 31, 2021.

The transaction will better enable UPC to focus on growing its specialty commercial property business and improve its statutory risk-based capital position by reducing operating leverage.

In exchange, HCI will pay United an allowance of $4.4 million towards already purchased catastrophe reinsurance and a provisional ceding commission of 25 percent of premium. The percentage could increase up to 31.5 percent depending on the direct loss ratio results for the reinsured business.

Furthermore, the two companies 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. It will also pay United a cash payment of up to $3.1 million depending on the amount of premium transitioned to HCI.

Under the agreed terms, 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.

HCI Group chairman and chief executive officer Paresh Patel said: “This transaction with United is a win for both HCI and United. 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.”