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HCI Group, Inc., the Florida headquartered property and casualty insurer and parent of Homeowners Choice Property & Casualty Insurance Company and insurtech TypTap, sees an opportunity to expand into the Florida market on its own terms, CEO Paresh Patel has said.

HCI Group has been known more for its expansion outside of Florida in recent years, as its Homeowners Choice underwriting business expanded to new states and its insurtech carrier TypTap began to source increasing premiums for the company.

But, given the disruption caused to the Florida property insurance market, the company has identified an opportunity and as a result is establishing new start-up carriers that will have a Florida focus, its CEO explained this week.

Speaking during the HCI earnings call for the end of the first-half, CEO Paresh Patel explained why he feels his company can get away with an expansion into a market many are shying away from.

“We are aware of the turmoil in the Florida homeowners market,” he explained. “These pressures, brought about by a combination of increased weather events, inflation and litigation, have and will continue to disrupt existing markets.

“This has resulted in a liquidation of some carriers this year, and leaves many others facing rating downgrades.

“We have a hard market and diminished competition, but our technology and our management team has shielded us from this turmoil.

“In fact, as a company that has successfully navigated the Florida market for 15 years, this turmoil provides a substantial opportunity.”

HCI grew its gross premiums written as a group by 30% during the second-quarter of 2022, but this was largely outside of Florida.

As a result, HCI Group’s national US premium is now approaching the amount it writes in Florida, resulting in a more balanced portfolio.

This is likely one reason for the increase Florida appetite, as the company feels it can do so with overexposing itself.

Another factor is the higher rates now available and HCI is already experiencing this with increased rates filed and approved for Florida in both its Homeowners Choice and TypTap carriers lately.

As these improved rates earn through, the company is confident it will help to make that business more profitable.

HCI raised $172.5 million in a debt issuance in May, which has set it on a better footing financially, alongside securing its necessary reinsurance at the renewals.

“We finalised our reinsurance with pricing and terms comparable to last year, while maintaining a conservative program with modest retentions and substantial limits. With reinsurance in place, Demotech reaffirmed our A exceptional ratings at both Homeowners Choice and TypTap,” CFO Karin Coleman said.

Which leads to the opportunity the company has identified.

CEO Patel said, “To take advantage of this opportunity, the first step was to ensure that we had ample capital, and we have completed that in Q2.

“In the coming weeks, we intend to apply to set up additional insurance carriers in the state of Florida, we expect these new carriers to begin writing business early next year.

“Why are we doing this? Basically, homeowners insurance is a product that is in high demand, and it will still be in high demand a decade from now. There is an opportunity here to pick up market share.”

Explaining why he feels his company can expand into Florida right now, Patel said, “Now, some are fearful due to present market conditions, but we have a track record that lets us navigate through these market conditions and secondly, we are focused on the long-term opportunity and intend to capitalise on that opportunity.”

Responding to a later question from an analyst on the Florida growth opportunity, Patel said the opportunity is particularly good for growth there right now.

“Because of the turmoil in Florida, we actually see a greater opportunity at this moment in time, unfolding in the fourth-quarter, than maybe we saw six months ago.

“So TypTap Insurance Company’s plans and expansion plans, that’s in Florida, are going unabated, unchanged.

“We see an additional opportunity in Florida and that’s why we are setting up new carriers to take advantage of those new opportunities,” he said.

Read all of our news and analysis on the Florida insurance and reinsurance market.

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