Bruce Lucas, the Chief Executive Officer (CEO) of full-stack insurtech Slide Insurance, has revealed to our sister publication Artemis that the firm has been approved for an up to 100,000 takeout of policies from Florida’s Citizens Property Insurance Corporation, which would represent substantial growth for the firm.
“We were just approved for 100,000 policies out of Citizens. It’s a pretty big block of business,” Lucas told Artemis earlier today. “We have about 175,000 policies in-force now, so if we were to get the full 100,000, that’d be a pretty significant increase in the size and footprint of our company.”
As required by law in the State of Florida, Citizens’ depopulation program looks to match Citizens policyholders with insurers interested in removing their policy from Citizens and providing coverage.
“I don’t think we’re going to get 100,000, that’s just an approval number,” continued Lucas. “We still have Citizens policies that almost uniformly across the board are underpriced for the market, and that’s going to hamper our ability to take policies out.”
Another potential hindrance to Slide’s ability to reach the 100,000 figure, which Lucas said is believed to be one of the largest approvals ever in the state, is the fact Citizens has filed for an 11% rate increase that is yet to be approved.
“If that’s not approved in the next week to two weeks at the latest, it’s really going to hamper everybody’s ability to take policies out of Citizens in October. We need that rate to kind of help close the gap a little bit,” he said.
With the depopulation program, policies can only be moved out of Citizens when the quotes from those looking to takeout are within 20% of the rates the policyholder is already paying.
“If they get that 11% rate increase it moves a whole cohort of policies into that within 20% range and increases our ability to take policies out. Without the rate increase, we’ve done the analysis, there’s not a lot there that we can take.
“I would say that our ability to take policies probably decreases about 70% to 80%. It’s a huge impact, because nobody’s going to be within the 20% and so most people are going to say no,” explained Lucas.
He also noted that as well as getting the regulators to approve a rate filing, Citizens needs to program it into their system in order to generate the anticipated renewal premium, which takes time.
“It has to be approved with enough time to programme it in their system so that they can give policyholders an apples to apples comparison and find those policies that are within 20%.
“The clock is really ticking on that, I would say probably by the end of next week is probably the deadline,” he reiterated.
“This is one of the largest takeout approvals ever in Florida, if not the largest and we’re very excited about growing our footprint in Florida. We think market conditions are radically changed since the December reforms and we think the future is very bright here,” he added.
If all goes to plan, the takeout will happen on October 17th, which of course is still in wind season, but Lucas confirmed that Slide has sufficient reinsurance to support the transaction and cover the additional risk.
“November’s not really a risk factor. We’re talking about 10 days, 12 days in October, at the end of October. Obviously, we’ll be watching the weather very closely to make sure that when we make the final decision on policies we take, that there’s nothing out there.
“So, we have enough reinsurance. I think the focus once the dust settles on all this is, just making sure that we maintain good business relationships with our reinsurance panel.
“We did have some reinsurers come in on an all-perils basis on first layer, second layer, and we want to make sure that they’re getting some type of adjustment premium to compensate them for the increase in severe convective risk that we’re putting on the portfolio.
“That’s a process we launched yesterday, and that dialogue will continue with the reinsurance panel, but we want to make sure we do right by our partners,” Lucas told Artemis.
This depopulation approval for Slide comes as Citizens’ policy count has been rising fast, with over 1.32 million policies in-force as of early July, representing more than $561.6 billion of exposure for the insurer.
The growth of in-force policies has come as insurers and reinsurers have pulled away from the region’s property market amid rising losses and elevated loss costs following natural disasters and inflationary impacts, as well as unique issues in the state around assignments of benefits.
In effort to stabilise and ultimately improve the market and entice re/insurers back in a meaningful and sustainable way, reforms have been passed designed to improve the claims and litigation environment in the state.
“It’s important to note that if it weren’t for the reforms that took place in December, we wouldn’t be doing this,” said Lucas. “I believe in the reforms, I have always believed in them. Early evidence is that the reforms are definitely working. It’s going to take years to fully play out and we’ll see what curveball comes at us next, it is Florida after all. But, the reforms give me the confidence to grow into this market and provide market solutions.”
“I think the state needs new capacity, without it Citizens is going to continue to grow. I have been a Florida-first underwriter my entire career and we think that there’s real promise in this market, between the reforms, market opportunities that are out there, and I think Commissioner Yaworsky is really laser focused on fixing this market,” he added.
All companies able to assume policies from Citizens have been approved by the Office of Insurance Regulation (OIR), and Lucas explained that the regulator did a very thorough review of everything at Slide.
Commenting on why he believes Slide was approved for such a large takeout, Lucas said that it’s threefold.
“One, me as the as the CEO and our management team, I’ve probably done more takeouts than any other CEO in Florida, if not number one, then number two.
“Also looking at our reinsurance tower, we purchased to the 200-year return period this year, which is an anomaly in the Florida market. As you know, we went back out in July and bought an extra $100 million in the hardest market I’ve ever seen. So it really shows our commitment to protecting the balance sheet, so that went a long way.
“I think our capital positions is very, very strong. We have probably more reserve capital at the holding company than any 10 or 15 companies combined in Florida, and having that additional capacity on our balance-sheet to backstop growth was an important contributing factor to the approval,” said Lucas.
Looking forward, Lucas said that it’s “likely” Slide will be back for more Citizens policies towards the end of the year.
“We do want to be able to balance our portfolio with some of the blackout policies that we can’t get to in October,” he said.
