Pause in Florida Writing was Planned; Growth Continues

The February news that five Florida-admitted property insurers had stopped writing latest business within the state painted an image of impending doom for the insurance market within the state. But officials with one in all those firms, the relatively young TypTap Insurance, have said that things aren’t so bad for everybody, and that its pause on latest homeowner policies was not unexpected.

It’s a part of an overall strategy of “diligence,” aimed toward ensuring potential losses don’t exceed capital in Florida’s troubled market, explained TypTap’s president, Kevin Mitchell.

TypTap, a part of HCI Group, a holding company for P/C insurers, reinsurance and real estate firms, started off as an insurtech. It’s still relatively small within the Florida market, with just over 48,000 policies in force through the third quarter of 2021, in keeping with regulatory reports. That’s lower than a tenth of the variety of policies held by Florida’s largest market-based property insurer.

But TypTap over the past 12 months has gained considerable attention, from Wall Street to Beach Boulevard, because of its phenomenal growth and potential for more: In the beginning of 2021, TypTap was in a single state. By the top of the 12 months, it was in 12, and the variety of policies in force in Florida had jumped to almost 56,400.

The firm reported it had raised greater than $100 million in capital, had $90 million in surplus, and was planning an initial public stock offering for early this 12 months. On a recent earnings call, HCI’s CEO, Paresh Patel, said TypTap could reach $1 billion in premium by 2025.

Company officials have said the expansion and TypTap’s strong financial picture are partly the results of its own insurance technology. While an increasing number of insurers now depend on gobs of information to quickly assess the danger of a property, TypTap began developing its own system a decade ago, before most firms began fascinated by it. That has made it possible to concentrate on the info that’s most relevant to a property’s risk, Mitchell said last week.

So, when TypTap announced in January it was holding off on the IPO, then said it could stop writing latest policies, just as other firms did the identical and two other Florida carriers were deemed insolvent, it led to some “one other one’s in trouble” comments and concerns out and in of the industry.

Mitchell recently sat down for an interview with the Insurance Journal to elucidate TypTap’s journey through the treacherous Florida landscape. The conversation has been flippantly edited for clarity and brevity. Mitchell declined to say what the corporate’s combined ratio is. Information from the Florida Office of Insurance Regulation shows the insurer had $155 million in total premium written through Q3 last 12 months and greater than $18 billion in potential exposure for policies that include wind coverage.

IJ: Explain the pondering behind why TypTap decided to stop writing latest business in Florida this 12 months.

KM: For TypTap, placing a pause on latest business within the spring is something we’ve done since 2018. We discover it to be an excellent, healthy solution to evaluate the business we wrote year-prior and make sure that that we’ve a balanced book of business from an exposure standpoint. And it allows us to judge cost of products sold, specifically what our future reinsurance pricing will probably be on June 1.

For us, we predict it’s a thoughtful, prudent, balanced step in managing a long-term viability of an insurance company. While we’ve been somewhat lumped in with the opposite firms which have stopped writing latest policies within the state, we were doing it for various reasons.

IJ: Is there a goal date for if you might start writing again in Florida?

KM: We evaluate on a monthly basis. I feel a determining factor will probably be the associated fee of reinsurance. So once we understand that – it’s our biggest cost – and once we’re in a position to higher understand where that falls on June 1, we’ll have a greater sense of when we are able to release the pause and begin writing organic business in Florida.

IJ: There’s been rather a lot written about Florida’s market and the form it’s in. Is that a part of the answer – diligence, as in “slow and regular wins the race?”

KM: There are such a lot of aspects that go into it, but what we’re seeing from a TypTap standpoint is the technology we’ve developed through our technology division, Exzeo, is driving a greater underwriting result and allowing us to make higher risk selection.

The technology that was built goes right down to the particular house level and is in a position to determine if that risk has the potential for long-term profitability.

IJ: How does Exzeo work?

KM: We began this journey in 2012. The entire thought process on the time was, 10 years in the longer term, how is insurance going to be transacted? We felt strongly that individuals would type of their name and their street address and answer a number of questions and give you the chance to get a quote. We had to construct quite a lot of elements because back in 2012, you didn’t have these data aggregators that you simply do now. So we had to assemble the info. There’s roughly 5.5 million homes in Florida and we’ve full underwriting data on each one in all them.

Why that is critically vital is that it allowed us to work out what was key to underwriting success and what data weren’t vital. Take into consideration 2022, today. Should you’re a latest company and also you’re using a knowledge aggregator, perhaps it’s HazardHub or Cape Analytics, and you place in an address and so they’ll offer you back a series of information points; it could be 50. But the advantage of constructing it yourself is we all know which data points are vital and which weight to placed on them. We also know if data points are missing. If data is missing could be the important thing for those who determine to underwrite that risk.

IJ: Does the info include things like sort of roof, age of roof?

KM: I feel there’s an entire host of characteristics that fall in there. You’ve got roof material, metal, shingle, tile; one story, two story; distance to coast; perhaps even the form of the roof: it it’s hip or gable.

IJ: The Florida Legislature just concluded without doing much on property insurance. What must be done in Florida, in your opinion? Are we actually in crisis?

KM: I assume for us, we are able to only talk about what TypTap and HCI is doing. One in all the things we’ve all the time done is we’ve tried to run the business no matter legislative reform and that has served us well. Our job is to develop underwriting philosophies that permits us to choose the policies which have long-term profitability and sustainability, and that’s our sole mission straight away.

IJ: Does TypTap put limits on the age of homes it is going to insure, as some carriers do?

KM: We’re pretty interesting. I think within the state of Florida, we’re insuring (12 months built) 1900 to 2014. We write primarily south of Interstate 4 (which runs from Tampa to Daytona Beach). A number of the homes we write are older, in-built the Fifties, 60s, 70s, 80s and 90s. Because there may be a necessity there. There are many markets which can be ready willing and able to put in writing latest construction, and we are able to provide a service to the agents. We’re agent-focused. We predict agents bring an incredible amount of value to the method.

IJ: TypTap doesn’t use a dedicated home-repair network, like some firms, does it?

KM: We don’t. For us, we predict the homeowner should determine who the suitable repair company could be. We would like to provide them the selection and the pliability to decide on someone they’re most comfortable with.

IJ: Any idea when the IPO may come back around?

KM: A number of persons are asking that query. We don’t communicate timing or intention. One thing CEO Paresh Patel did mention within the earnings call is that we’re able to execute on it so long as we are able to get appropriate value for the corporate. When have a look at potential IPO for TypTap, the earnings call spoke to a number of the fundamentals that must be achieved. You’ve got to point out that you simply are good stewards of capital; you could have to point out growth and profitability; and give you the chance to point out that your technology drives a differentiated result. Those are going to be key because when you concentrate on 2021, when lots of the hype and buzz was within the insurtech space, the main target was on growth in any respect cost. We never really subscribed to that model. The opposite piece of it’s, we’re not a user of quota-share (reinsurance). So, for those who’re not a user of quota-share, you could have to grow in a thoughtful manner.

IJ: There’s been some news recently concerning the St. Johns Insurance Co. insolvency and Slide Insurance getting their book of business. Is that something TypTap would have desired to bid on?

KM: From a TypTap side, our focus is on organic business in Florida. I feel it’s great Slide has are available to assist smooth the transition for those St. Johns policyholders, so we wish them better of luck with the transition.

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