Velocity Risk Underwriters, the catastrophe-exposed property insurance specialist managing general agency (MGA) operation, is set to exit the homeowners insurance marketplace.
Effective May 26th, Velocity Risk Underwriters has ceased writing new homeowners insurance business and has begun the process of exiting all of its homeowner programs, our sister publication Artemis reported.
No specific reason was given, with Velocity Risk simply stating, “After careful consideration and evaluation of various factors, we have made the difficult decision to permanently exit the homeowner’s market.”
On the non-admitted side, this means an exit as fast as state-specific regulations will allow the MGA to do so, while in the admitted marketplace, Velocity Risk will need to follow the withdrawal guidelines, we understand.
The performance of homeowners insurance business over recent years in catastrophe-exposed regions of the United States could be a key driver for the decision.
Indeed, the homeowners insurance market has been challenged by significant insured catastrophe losses from both major events such as hurricanes and wildfires, alongside more attritional and so-called secondary perils, such as severe weather, rainfall, flooding and winter storms.
This, combined with rising reinsurance prices, has increased the cost of writing homeowners business and the margins are likely compressed. Of course, there are likely other reasons for the exit, which we may learn in the near future.
The Velocity Risk website no longer mentions residential or homeowners business, aside from a contact detail or agent servicing, while the product listing only speaks about middle market and small business covers.
This news follows reports that State Farm is exiting the property insurance market in California. At the time, State Farm cited “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market” as reasons for the exit.
It’s likely that these reasons align with Velocity Risk’s, at least in part.
This news also may go some way towards explaining the reasoning behind reports from earlier this week that Velocity Risk is set to acquire E&S insurance carrier Independent Specialty Insurance Company (ISIC) from Markel’s State National unit.
