Hippo increases XoL reinsurance limit and reduces quota share to retain more risk - Artemis.bm

Hippo completes 2024 reinsurance renewal, retains more risk, and expands excess-of-loss protection, showing growing confidence in profitability and predictability.

Home insurance company Hippo has recently completed its reinsurance program renewal for the year 2024. This renewal includes an expansion of its excess-of-loss reinsurance protection, as well as a decrease in its proportional cover through quota shares in order to retain more risk.

A year ago, Hippo's reinsurance renewal was more focused on quota shares, as the company sought to align itself with risk takers and share losses and profits from nearer the ground-up. However, the company is now looking to retain more risk, feeling that it is better able to manage the volatility in its book on its own balance sheet. Despite this, Hippo will continue to use excess-of-loss reinsurance to cover itself against major catastrophes.

Rick McCathron, CEO and President of Hippo, expressed confidence in the company's business, stating that their reinsurance partners have affirmed their confidence with improved terms for the second year in a row. McCathron also highlighted the company's efforts to reduce exposure to weather-related volatility and its proactive approach to home protection, which has driven significant improvements in loss ratio and made the Hippo Home Insurance Program attractive to reinsurers.

CFO Stewart Ellis added that the successful placement of the 2024 reinsurance program reflects the company's growing confidence in the profitability and predictability of its underwriting results.

The 2024 Hippo reinsurance program continues to feature quota share cover, but these have been reduced. Hippo has decided to purchase substantially less proportional reinsurance in 2024 and retain more of the Hippo Home Insurance Program premium and associated non-catastrophe attritional losses on its balance sheet. This reflects the company's expectation of continued improvement in the attritional loss ratio and steps taken to lower volatility.

Hippo has increased its purchase of excess-of-loss (XoL) reinsurance, raising its per-occurrence XOL limit by 11% and increasing the number of participating reinsurers in its XoL reinsurance tower from 14 to 19. The company stated that it is now protected on the upper layers of risk up to a 1-in-250-year event.

It's worth noting that Hippo's language has changed from being "protected on the upper layers of risk beyond a 1-in-250 year event" a year ago to "up to a 1-in-250-year event." This may indicate that more excess-of-loss protection has been purchased lower down to fill out some of the cover that goes with a shrinking of the quota share protection.

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