#USA #Tampa #Heritage Insurance #Reinsurance Program #CAT XOL

Heritage Insurance Completes 2025-2026 CAT XOL Reinsurance Program

On May 8, 2025, Heritage Insurance Holdings, Inc. (NYSE: HRTG) announced the successful placement of its 2025-2026 catastrophe excess-of-loss (CAT XOL) reinsurance program. This program is crucial for the company’s operations, given its focus as a super-regional property and casualty insurance holding company.

Key Highlights of the Program

According to Ernie Garateix, CEO of Heritage, the new reinsurance arrangement reflects the commitment of their reinsurance partners. Significant improvements include an increase in the coverage limit by approximately $285 million from the previous year.

The total limit now stands at an impressive $2.479 billion, compared to last year’s $2.194 billion. Additionally, the cost of the reinsurance grew slightly to approximately $430.9 million, a modest increase of $7.8 million compared to the previous year.

New Catastrophe Bonds Introduced

This year’s program also marks the introduction of two new catastrophe bonds, providing an additional $200 million in limits. The reinsurance program includes different exhaustion points for external party reinsurance towers, with approximately $1.6 billion for the Southeast, $1.1 billion in the Northeast, and $865 million in Hawaii.

Garateix expressed gratitude towards their dedicated reinsurance partners, acknowledging their support through various catastrophic events over past years. The company highlights a focus on prudent financial growth as they strive to expand their operations further.

Detailed Financial Aspects

The new 2025-2026 program offers multi-year indemnity coverage, fully collateralized through the issuance of catastrophe bonds by Citrus Re Ltd., a Bermuda-domiciled special purpose vehicle. Limits provided for the hurricane season include:

• - A Southeast limit of $200 million
• - A Hawaii-specific limit of $100 million
• - A Northeast limit of $120 million and a combined Northeast/Hawaii limit of $115 million.

The company will hold a loss retention that approximates $50 million in the Southeast and Hawaii, while the Northeast will have a retention of $39.3 million. They also plan to reduce this retention through affiliated captive reinsurer, Osprey Re.

Additionally, Heritage will continue its participation in the Florida Hurricane Catastrophe Fund at 90%, consistent with previous years. The entire reinsurance program remains indemnity-based, with the notable absence of parametric covers.

Future Implications

Garateix noted the program's higher retention levels are aligned with the company's risk tolerance and robust financial positioning, enabling them to handle future uncertainties more effectively.

About Heritage Insurance Holdings

Established as a super-regional property and casualty insurance holding company, Heritage Insurance Holdings operates through various subsidiaries and maintains a vast network of agents. The company writes around $1.4 billion in gross premiums encompassing personal and commercial residential coverage across states like the Northeast, Southeast, Hawaii, and California.

Their operations are designed to focus on catastrophe-related insurance, ensuring their clients are covered against severe weather events such as wildfires, hurricanes, winter storms, and other natural disasters.

As they navigate through current market challenges, Heritage’s strategic reinsurance placements are pivotal for maintaining their operational integrity and growth trajectory in the competitive insurance landscape.

Conclusion

In a regulatory environment characterized by volatility, these proactive measures by Heritage Insurance reflect not only their commitment to financial prudence but also their resilience in the face of challenges that requisite robust risk management strategies. With their strategic placement in the reinsurance market, Heritage positions itself to continue supporting its policyholders effectively while ensuring financial stability.