HCI Execs to Launch Condo Insurance Exchange in Florida After OIR Approval

Executives at Tampa-based HCI Group, the holding company for Homeowners Choice and TypTap Insurance companies, are having a busy fourth quarter.

Just a day after HCI announced that Homeowners Choice had successfully assumed more than 53,000 policies from the state-created Citizens Property Insurance Corp., Florida regulators last week approved a new condominium insurer led by Paresh Patel, the CEO of HCI Group.

The approval of Condo Owners Reciprocal Exchange, or CORE, comes at a time when many Florida condo owners and associations are finding it difficult to obtain coverage.

“We are trying to help alleviate an insurance crisis in Florida,” Patel, who is listed as chairman of Condo Owners Reciprocal. “People have been coming to us and asking us if we could do something for the condo associations.”

The new insurer will start small, applying to assume less than 1,000 condo policies from Citizens, Patel told Insurance Journal. The insurer’s surplus levels and other financial information should be available this week and the firm should be operational by mid-February, he said.

Florida’s insurance commissioner said in a statement last week that the reciprocal exchange validates 2022 and 2023 legislative reforms that aimed to limit crippling levels of claims litigation.

“This announcement is further indication that the reforms are having the intended impacts on our market and further expanding the choices for consumers,” Commissioner Michael Yaworsky said.

The legislative reforms did not take effect soon enough to prevent other Florida insurers in recent years from pulling back on condo coverage, a market that was deeply affected by the 2021 collapse of the Champlain Towers South condo building in Surfside, which killed 98 people. Florida lawmakers in 2022 tightened building inspection and financial reserve requirements for condominiums statewide, but a number of insurance carriers have continued to beg off new condo business and renewals and have raised premiums sharply.

News reports have indicated that condo associations in Tampa and Miami have seen premiums increase by 500% and 1,000% in recent months.

Patel said that he had heard from condo associations that have had such trouble finding affordable coverage that they have considered forming their own captive insurance companies – only to be confronted with the high cost of reinsurance.

“There’s a huge need in the market right now” for more market-based condo insurance carriers, Patel added.

An Office of Insurance Regulation consent order, signed Nov. 20 by Yaworsky, notes that Condo Owners Reciprocal is an unincorporated aggregation of at least 27 subscribers that will provide fire and multi-peril coverage. Patel is shown to be chair of the exchange. Jeff Rainey, with the Colodny Fass law firm, is listed as a consultant.

The enterprise has represented that it has the minimum surplus on hand to meet Florida’s statutory requirements, and $300,000 has been put down as an initial deposit, the order notes. The company expects a profit margin of 3.8%, according to an October rate filing with OIR.

OIR has approved some 16 new P&C entrants into the Florida market this year, including Orange Insurance Exchange, Crossroads Insurance Co., Georgia Builders Insurance, Mainsail Insurance, Orion180 Insurance, Republic, Geovera, United Builders Insurance and Westguard Insurance Co. Several of those indicate they offer commercial multiperil coverage, but it’s unclear how many will provide condominium packages.

Despite the difficulties seen in the Florida condo arena this year, the market remains relatively large. The state has more than 27,600 condominium buildings, comprising 1.5 million units, the secretary of the state Department of Business and Professional Regulation said at Senate Regulated Industries Committee meeting Nov. 14. And more condo regulations could be on the way, which could ultimately lessen the risk for insurers. At the Senate meeting, attorneys and prosecutors said that further safety and anti-corruption measures are needed to protect owners and residents.

The startup of Condo Owners Reciprocal Exchange is the latest strategic move by the publicly traded HCI. In the last three years, HCI has created TypTap Insurance, a tech-focused property insurer that has largely stayed out of the Florida homeowners market; ExZeo, a technology firm that utilizes artificial intelligence and imagery in underwriting and claims management; Greenleaf Capital; and a reinsurance unit.

HCI, founded in 2006, reported a healthy third quarter 2023, with a much-improved net income compared to Q2 2023, due in part to the shedding of almost 50,000 policies in the last year.