Porch Group, Inc., a vertical software company has announced that its insurance business, Homeowners of America (HOA) has filed an application to form and license a Texas reciprocal insurance exchange with the Texas Department of Insurance (TDI).
If the application is approved and fully implemented by Porch, its insurance underwriting business would be conducted exclusively through the reciprocal.
A reciprocal insurer is an insurance association that is owned by its policyholder members who spread risk by pooling their risks together.
The formation of the reciprocal will be a big step within Porch’s long-term strategy to reduce its exposure to earnings volatility from its insurance segment, by mitigating direct exposure to both insurance claims and weather events.
At the same time, the reciprocal potentially may help reduce the impact of a challenging reinsurance market that has both less capacity and higher prices.
If the application does get approved, this could provide a number of benefits for Porch. Firstly, homeowners that purchase policies in the reciprocal could receive benefits and value-added services unique to what Porch and its companies offer.
Secondly, Porch would also be able to continue to pursue its ongoing growth strategy by reaching homebuyers early and throughout the homebuying journey, and leveraging access to homebuyer information and property data.
Furthermore, this reciprocal exchange structure has been utilized by other homeowner insurance businesses such as Farmers Insurance. The day-to-day operations of the Reciprocal would be managed by a subsidiary of Porch, which would receive ongoing fees for originating, underwriting and processing claims on behalf of the reciprocal.
The launch of the Reciprocal remains subject to review and approval by the TDI, which is not expected before the third quarter of 2023.
Additionally, formation of the reciprocal is subject to ongoing Porch and regulatory review in context of broader capital and operating environment and the decision to proceed remains within the Company’s discretion.
