SureChoice Underwriters Reciprocal Exchange (SURE) will look to broaden its footprint beyond its launch state of Texas to provide an additional source of stable capacity to SageSure as the property cat-focused MGU looks to push its premium volumes beyond $800mn in 2021, The Insurer can reveal.

Terry McLean – Sage Sure and Sure

SageSure has funded the launch of the Texas-domiciled reciprocal exchange with a surplus debenture and the start-up is now offering its SURE HO-3 homeowners product through contracted independent agents.

It is currently in the market with TigerRisk to place its reinsurance program effective 15 June.

As previously reported, Demotech A-rated SURE is the first reciprocal exchange to be launched in Texas since 2004 and will distribute products exclusively through SageSure’s network of agents and brokers.

It will initially focus on meeting the increasing demand for coverage in Texas for homeowners with significant catastrophe exposure.

In an interview with this publication, SageSure CEO Terry McLean said establishing the reciprocal exchange was a way for the firm he launched back in 2005 to stick with the MGU model without becoming a fully-fledged carrier.

Although the tech-enabled MGU has funded the launch of SURE, reciprocal exchanges are primarily policyholder-owned as surplus builds up from premiums paid into the vehicles and are managed by a so-called attorney in fact (AIF) for a fee.

In the case of SURE, the vehicle is led by former Independent Mutual Fire Insurance Company president and CEO Ed Konar as president of the carrier and the AIF.

SageSure CEO Terry McLean says SURE will look to expand its footprint beyond Texas

McLean explained that SURE wasn’t set up to replace existing carrier relationships and suggested the move was an evolution of SageSure’s previous creation of a captive structure.

He also highlighted the challenges MGUs can face in finding new capacity if for any reason an existing carrier partner retrenches.

“We don’t see the reciprocal exchange model dominating our business model. We just think of it as one of the spokes in our strategy for growing SageSure,” McLean commented.

The executive noted some of the recent headlines about one of SageSure’s existing carrier partners, FedNat.

As previously reported, the Florida-based company has been significantly repositioning its portfolio and business model after a challenging period of loss activity impacted its performance over the last 18 months.

“They’ve been a great partner and we couldn’t ask for more from a partnership, but they can’t be our only Demotech source of capacity.

“The relationship is stable and we expect it to continue but there is not the same opportunity for growth as we’ve seen in the last few years. SURE helps solve that for us,” he commented.

Diversification

SageSure currently writes on behalf of its carrier partners in 14 states, including those typically exposed to Atlantic windstorm risk as well as California and Alaska.

“We imagine SURE over time would expand largely to that footprint – besides Alaska. We’ll be looking at strategies to get licensed more broadly, like shell companies or some other acquisition inside of SURE.

“Geographical diversification, especially with hurricane-exposed business, is a critical part of the strategy, so we’ll be looking for ways to do that as soon as possible,” the former RenaissanceRe executive continued.

It has existing carrier relationships with IAT Insurance Group (Acceptance Casualty Insurance Company, Harco National Insurance Company, Occidental Fire and Casualty Company of North Carolina, TransGuard Insurance Company of America and Wilshire Insurance Company), FedNat Insurance Company, Independent Mutual Fire Insurance Company and SafePort Insurance Company.

The MGU has exclusive relationships with individual carrier partners to distribute specific products in specific geographies.

Depending on the product and geography, McLean said the ideal mix of carrier partners would be at least two Demotech-rated admitted carriers, two AM Best-rated admitted carriers and two non-admitted options potentially including Lloyd’s and a US domestic E&S player.

Under the radar

Operating largely under the radar, SageSure has been steadily growing its book of business over the last decade.

In 2013 it was at $83mn in premium volume and set out to be at $250mn by 2017.

McLean said that target was met with profitable growth, and the MGU then looked to double in size by 2020, in fact ending up writing $610mn of premiums last year.

SageSure has grown at an average rate of around 30 percent since 2013 and is on course to add more than $200mn of new business in 2021.

SageSure-premium-shows-consistent-growth-($mn)

The executive said the MGU delivered a strong track record of profitability to its carriers, with the exception of 2020, a highly active year for windstorm loss activity.

“Until 2020 we had made every carrier margin successfully despite hurricane activity, then in 2020 we were overall about a 100 combined ratio across our carriers, although there was some volatility depending on carrier concentration in the Southeast and Gulf of Mexico,” he commented.

SageSure is primarily a “preferred” homeowners property insurance specialist, with the business accounting for around 90 percent of its portfolio – although it did launch a commercial business owners’ policy product last year through its existing distribution channels, initially via independent agents.

It has partnerships with the agency networks of several nationwide personal lines writers including GEICO, Allstate, Farmers and Liberty Mutual, allowing them to offer their customers coverage in areas where they don’t currently write themselves.

The firm pitches itself as an “innovation-focused insurance and technology company specializing in catastrophe-prone property markets” and claims to be the “leading homeowners insurtech organization in the US measured by premium and profitability”.