Swiss Re is gaining traction in its bid to grow the private US flood insurance market after signing up several new carrier and MGA partnerships to offer the product in the second half of 2018, The Insurer can reveal.
The reinsurance giant has teamed up with Cabrillo Coastal General Insurance Agency in Florida to enable the MGA to provide the option of flood cover on the homeowners, mobile home and dwelling fire products it offers in the state.
Although details of the arrangement have not been disclosed by either party, it is thought that Cabrillo offers flood insurance as an endorsement on policies it writes on behalf of its carrier partners, with significant reinsurance support from Swiss Re.
The reinsurer is also heavily involved in the underwriting process, providing its risk assessment and pricing tools for flood to its MGA and carrier partners to help them develop products.
In Florida, Cabrillo writes on the paper of Demotech-rated Safe Harbor Insurance Company and US Coastal P&C Insurance Company, as well as an unnamed AM Best-rated surplus lines carrier, according to its website.
Swiss Re has also added direct partnerships with several insurers in addition to the agreement it announced with Florida’s Security First Insurance last July.
Names of all the insurers signed up have not been disclosed. But it is thought that total carrier relationships where there has been full deployment of Swiss Re capacity and its flood risk assessment and underwriting tools now exceed ten, with the prospect of others being added in 2019.
Although he wouldn’t comment on specific carrier relationships, Swiss Re’s president of US P&C Keith Wolfe said: “The private market for flood is not as big as we’d like.”
“Even though we see value for public participation in the flood market, there is a big opportunity for the private market to flourish and be successful,” he continued.
Typically Swiss Re provides the flood tools it has developed to carrier partners to help them assess and price risk based on modelled loss costs.
It will also work with insurers to help them develop forms and policy endorsements, although the primary carrier will ultimately deal with the regulator over filings.
Swiss Re will usually take the vast majority of the risk at the onset of the project launch, providing a quota share in the region of 90 percent.
Over time as the primary insurer grows its own understanding of flood risk in its portfolio the expectation is that they will become comfortable in taking more of that risk on their own balance sheets.
In return, Swiss Re gets access to the distribution relationships owned by carriers and MGAs to get its tools and capacity to potential buyers of private flood insurance.
Wolfe said the reinsurer’s goal “is to get as many of these proportional deployments out there as we can”.
“We’ve had positively surprising results out of most deployments so far where the penetration rate is higher than our assumptions for these deals,” he added.
While Florida has seen the most traction so far, Swiss Re has also seen opportunities in other low-lying coastal states, including Texas and the Carolinas.
There is growing interest from insurer clients spreading up the East Coast to the mid-Atlantic and New England, said the executive.
The number of private market flood insurers in Florida has been growing rapidly over the last couple of years, with 25 carriers authorized to write primary flood and a further six able to write in excess of the National Flood Insurance Program (NFIP) program.
The debt-ridden NFIP has been in a parlous state for several years, with its deficit mounting after heavy hurricane losses in 2017 and 2018 as well as other damaging flood events.
Sellers of private flood cover are not only looking to provide an alternative to those currently buying NFIP policies, but also the greater majority of homeowners who don’t currently have any flood cover.
Private offerings in some instances have looked to broaden the coverage offered by the NFIP – including flood definition – and limit deductibles.
The Swiss Re-Security First partnership sees the carrier offer enhanced coverage with a single deductible for wind and flood.
Swiss Re estimates that the US experiences economic losses of around $15bn from flooding each year, of which only $5bn is insured.