Homebound Insurance Exchange Approved in Texas
The Texas Department of Insurance (TDI) has given the green light to the formation of Homebound Insurance Exchange, a reciprocal exchange that will take on a personal lines business book.
According to sources familiar with the situation, the new exchange secured its certificate of authority in recent days after initial conditional approval. The book of business is estimated to be around $200 million in annual gross written premium.
Key Investors and Structure
Sources indicate that ReAlign will be among the investors in Homebound’s attorney-in-fact. The reciprocal exchange is supported by a surplus note of approximately $70 million. The business being transferred is worth approximately $200 million GWP in personal lines property, currently written on an admitted basis by National Summit Insurance Company. National Summit is a renamed subsidiary of National Lloyds, following its acquisition by ReAlign and Align Financial in July 2020. Align Financial was subsequently acquired by Howden-owned MGA platform Dual in 2021.
Howden Capital Markets & Advisory assisted in the launch of the reciprocal exchange. This is the latest in a string of such ventures that the Howden unit has worked on in recent years.
Strategic Rationale
The move to Homebound is designed to free up capital at National Summit. This will allow National Summit to write a more diversified portfolio of third-party MGA business at the ReAlign carrier. The decision comes after increasing reinsurance costs and higher retentions for catastrophe-exposed property business.
National Summit has an ‘A’ financial strength rating from AM Best, and it purchases property cat excess of loss reinsurance up to a 1 in 250 return period. National Summit, American Summit, and Summit Specialty are carrier affiliates of ReAlign.
National Summit and American Summit focus on P&C for low-value dwellings and manufactured homes. Summit Specialty specializes in surplus lines business.
National Summit is a Texas-domiciled admitted carrier, licensed in 41 states. American Summit, also a Texas admitted carrier, is licensed in 45 states. Summit Specialty is a Nebraska non-admitted carrier authorized in 49 states.
ReAlign’s website states its goal to be the leading underwriter of program administrator-managed specialty insurance programs in the U.S.
Growing Popularity of Reciprocal Exchanges
Homebound is the most recent in a series of reciprocal exchanges established in recent years. This structure has gained popularity, particularly for writing homeowners insurance and other businesses exposed to catastrophes.
Another anticipated entrant to the market is a new Texas-based reciprocal exchange. This exchange will launch by The Baldwin Group to support its builder-sourced homeowners business. The intermediary’s specialty MGA division serves as attorney-in-fact.
Reciprocal exchanges are similar to mutual insurers. They are unincorporated aggregations with at least 25 policyholders. An attorney-in-fact manages the exchange.
Policyholders essentially own the vehicles. However, an attorney-in-fact provides operational services, such as underwriting, claims management, and other management services, for a pre-agreed fee.
ReAlign did not respond to a request for comment.
