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HCI Group eyes rate increases to counter rising reinsurance costs

4th August 2020 - Author: Charlie Wood

The insurance subsidiaries of HCI Group plan rate increases to offset, in part, increased reinsurance costs.

Map of FloridaHCI’s largest subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., has asked state insurance regulators and received approval for a 6.9% rate increase for its homeowners’ and condominium insurance products.

The rate increase will take effect October 1, 2020.

Additionally, Homeowners Choice plans to apply for a 5-7% rate increase for both its dwelling and fire policies, and wind-only policies, subject to final negotiations with regulators.

HCI’s InsurTech operation, TypTap Insurance Company, implemented a 20% increase for its flood insurance product on July 15, 2020.

TypTap has also applied for a 12-14% rate increase for its homeowners’ insurance product. If approved, this rate increase would be expected to go into effect before the end of the year.

“Increased reinsurance costs, by far our largest cost, have forced us reluctantly to seek rate increases,” said HCI Group Chief Executive Officer Paresh Patel.

After conducting virtual field research in Florida recently, analysts at Keefe, Bruyette & Woods  expected reinsurance pricing in the state to increase at least 20%.

One CEO reported hearing about 30-50% rate increases in the marketplace, with particularly vulnerable companies given only 24 hours to decide whether to accept 75%-plus rate increases.

Analysts did however caution against extrapolating from extreme examples, and generally don’t expect aggregated rate increases to replicate the post-Katrina era’s widespread 50-70% rate increase

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