United Fire Group Adapts to High-Risk Environments
California’s insurance market is currently experiencing significant volatility, influenced by factors such as wildfires, landslides, and earthquakes. This has made it one of the most challenging environments for insurers, leading to higher claims and financial instability. Some insurance providers are responding by retreating entirely, while others are tightening their underwriting standards, making it difficult for some businesses to obtain coverage. However, United Fire Group (UFG) Insurance is following a different approach, concentrating on diversification, technology, and cautious risk management.
“We operate nationally, and California is one of our largest states, along with Texas and Florida,” noted Clan Salazar, vice president of specialty at UFG. “These three states are not only the largest in terms of premiums, but they also present the greatest challenges.” Instead of withdrawing from these areas, UFG has opted instead to spread its exposure across different geographical locations and lines of business. The goal is to maintain a strong presence in high-risk areas while maintaining the long-term financial stability of the company.
Strategic Underwriting and Risk Management
A key element of UFG’s strategy involves a disciplined underwriting approach. The company, which previously invested heavily in wildfire coverage, reassessed its position when market conditions shifted. Salazar explained, “We used to write a significant amount of wildfire exposure, but when the market dynamics changed, we scaled back.” This decision to exit when premiums no longer reflected the level of risk may have helped UFG avoid substantially larger losses as conditions worsened.
UFG is also embracing technology to better manage risks in this unstable environment. In particular, advanced catastrophe modeling has changed the company’s capacity to assess risk. Salazar stated, “We’ve improved our data collection and integrated new CAT modeling tools, letting us better analyze exposure and determine where we want to grow.” These models combine internal company data with industry data for a more in-depth understanding of potential vulnerabilities.
“Technology is a tool, not a solution in itself,” Salazar cautioned. UFG Specialty uses data-driven models in combination with the expertise of its experienced underwriters. “We heavily rely on the judgment of our people,” he added, emphasizing the value of the nuanced decisions these experts bring to the process.
Addressing Generational Shifts and Client Needs
Retaining expertise, however, is a challenge. Like many companies in the industry, UFG is facing a generational transition, with senior underwriters retiring and younger professionals entering the field. Bridging the knowledge gap is crucial for maintaining a smooth transition. “We have many young people enthusiastic about learning, but it is necessary that we also pass on the knowledge of our experienced personnel,” Salazar noted. To facilitate this, UFG invests in mentorship and training programs. This helps make sure that new underwriters are both tech-savvy and capable of making sound judgments.
UFG also focuses on reaching out to brokers and clients, especially as more businesses transition from standard insurance markets to the excess and surplus (E&S) market. This shift can sometimes be difficult, particularly for clients unfamiliar with the process. Salazar said, “We see clients who haven’t worked with E&S before.” “Brokers are key to helping them understand why their business is leaving the standard market.” In these cases, brokers serve as essential interpreters, explaining rising premiums, stricter underwriting standards, and the new realities of risk transfer.
Even with increased competition, Salazar sees opportunity. The E&S market is attracting fresh capital and new Managing General Agents (MGAs), providing an influx of products and skilled underwriters. However, UFG is still cautious. “There’s increased capacity, but it will eliminate situations where losses can’t be absorbed,” he observed. This underscores the significance of disciplined underwriting in a competitive market. For UFG, success means more than avoiding risk; it means adjusting strategies, investing in its people, and adopting the technologies needed to stay flexible. In California’s unpredictable insurance market, this mix of resilience and foresight could prove to be the company’s greatest competitive advantage.
