Texas Department of Insurance OKs Porch Group’s Reciprocal Exchange

The Texas Department of Insurance approved an application from Porch Group Inc. to form and license Porch Insurance Reciprocal Exchange, a homeowners insurance reciprocal exchange.

Porch said that forming PIRE is a key step in its strategy to increase profitability and stabilize earnings in its go-forward insurance reporting segment by reducing direct exposure to claims and weather risks.

Owned by its policyholders, Porch will be the operator of PIRE, managing operations.

After customary administrative closing procedures, Porch plans to contribute $10 million cash in exchange for a surplus note to capitalize PIRE. Around January 1, 2025, Porch says it will sell Homeowners of America Insurance Company to PIRE, including all its policies, premium, assets and liabilities. In exchange, Porch will receive an incremental surplus note equal to HOAIC’s end-of-year surplus less Porch’s existing $49 million surplus note which will be assigned to PIRE and continue forward.

As the operator, Porch will earn commissions and fees that blend to a take rate of roughly 20% of gross written premium and PIRE will manage to an appropriate risk based capital and surplus. HOAIC is expected to maintain its “A” financial stability rating from Demotech.

Porch said it does not expect PIRE’s approval to impact its 2024 financials.

Porch Group is a homeowners insurance and vertical software platform.