December 5, 2023

Heritage Insurance Holdings, Inc. has now completed its catastrophe excess loss reinsurance renewals for the year ahead and hurricane season, with continued diversification outside of Florida evident as the insurer’s Southeast reinsurance tower is now one year shorter than its Northeast counterpart.

ernie-garateix-ceo-estate insuranceHeritage has expanded across the U.S. over the years, but its Florida headquarters have been the company’s largest concentration of risk, and thus the target of most of its catastrophe reinsurance protection.

But now, as Heritage expands more quickly to the Northeast while continuing to trim and manage its exposure to the Southeast, the reinsurance towers have swapped, with the Northeast tower now stretching to the $1.3 billion depletion point, and Heritage’s Southeast re tower topping out at 1.1 USD billion.

The full indemnity based catastrophe excess loss reinsurance program covers the subsidiaries Heritage Property Casualty Insurance Company, Narragansett Bay Insurance Company and Zephyr Insurance Company for the year ending May 2024.

Costs have of course risen as the reinsurance market struggles, with Heritage saying it has paid out about $420.5 million for its 2023-24 reinsurance program, which represented 32% of in-force premiums at March 31, 2023, up from the previous year. 31% of premiums effective March 31, 2022.

Heritage’s first event of the coming year reinsurance tower exhaustion point set for $1.3 billion For Northeast, $1.1 billion in the southeast and $870 million exist hawaii.

These include the recent issuance of new Citrus Re catastrophe bonds, which we reported Heritage successfully priced below the midpoint of initial guidance to provide $235 million of reinsurance protection, named by Citrus Re Ltd. (Series 2023-1) Storm deal.

This is on top of the $100 million in Northeast-focused Citrus Re Ltd. (Series 2022-1) catastrophe bonds it sponsored a year ago.

This year, for the first time, Heritage will preserve the Southeast and hawaii Roughly $40 millionand $30 million In the Northeastern United States, it was the same as the previous year. As Heritage will use its captive reinsurer Osprey Re in addition to open market reinsurance, some individual insurers will have lower retention.

For 2023-24, Heritage again opted for 90% FHCF participation, but also took advantage of the Reinsurance Assistance Policyholder (RAP) program, which is expected to provide it with a limit of approximately $71 million at no cost.

A year ago, Heritage didn’t use the RAP plan, so on the same basis, it’s safe to assume that if it had paid that $71 million cap, it could have cost more for this year’s plan.

“We are pleased to announce the completion and terms of our 2023-2024 CAT XOL reinsurance program,” Heritage CEO Ernie Garateix explains“We are grateful for the continued support of our reinsurance partners and their recognition of our efforts to provide appropriate coverage for the marketplace.

“We expect interest rates to continue to rise and will undertake underwriting actions within statutory guidelines to ensure the long-term profitability of the markets we serve. We will continue to pursue profitable opportunities while maintaining a balanced portfolio.”

Heritage has benefited from being able to reduce its policy volume while increasing its in-force premiums as markets firm, resulting in premiums effective March 31, 2023 of $1.3 billion, up nearly 11% from the previous year, while policy volumes have shrunk and increased about 50,000.

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