By David Bull

March 10 - (The Insurer) - The Texas Department of Insurance has approved the formation of Homebound Insurance Exchange, which is set to take on a book of around $200 million annual gross written premium of personal lines business from National Summit Insurance Company.

According to sources with knowledge of the situation, the new reciprocal exchange received its certificate of authority from the TDI in recent days after previously receiving conditional approval.

Howden Capital Markets & Advisory worked on the launch of the reciprocal exchange, the latest in a series of such vehicles the unit of Howden has worked on in recent years.

ReAlign is expected to be one of several investors in Homebound’s attorney-in-fact, with the reciprocal exchange funded by a surplus note of around $70 million.

The business to be transferred to the new vehicle is a circa $200 million GWP personal lines property portfolio currently written on an admitted basis by National Summit – the renamed National Lloyds carrier subsidiary that was acquired in what was described at the time as being a unique bifurcation transaction by ReAlign and Align Financial in July 2020.

Align Financial was acquired by Howden-owned MGA platform Dual in 2021.

Sources said the rationale behind the move is to free up capital at National Summit to write a more diversified portfolio of third-party MGA business at the ReAlign carrier.

The decision to move the admitted personal lines book to Homebound comes after a period of escalating reinsurance costs and higher retentions for cat-exposed property business.

National Summit is rated with a financial strength of A by AM Best, which means it buys property cat excess of loss reinsurance up to a 1 in 250 return period.

The company is one of three carrier affiliates of ReAlign, alongside American Summit and E&S carrier Summit Specialty.

According to the parent company’s website, National Summit and American Summit offer P&C for low-value dwellings and manufactured homes, while Summit Specialty writes surplus lines business.

National Summit is a Texas-domiciled admitted carrier that is licensed in 41 states, while American Summit, also a Texas admitted carrier, is licensed in 45 states.

Summit Specialty is a Nebraska non-admitted carrier that is authorised in 49 states.

On its website, ReAlign says it is aiming to be the leading underwriter of program administrator managed specialty insurance programs in the U.S. It is led by Tim McAuliffe and Grant Lippincott as presidents.

RECIPROCAL POPULARITY

Homebound is the latest in a series of reciprocal exchanges launched in the last few years, as the structure has gained popularity, especially as a vehicle for writing homeowners and other cat-exposed business.

Another imminent entrant to the space is a new Texas-domiciled reciprocal exchange being launched by The Baldwin Group to support its builder-sourced book of homeowners business, with the intermediary’s specialty MGA division serving as attorney-in-fact.

A reciprocal exchange insurer has similarities to a mutual. It is an unincorporated aggregation of at least 25 policyholders, with the reciprocal exchange managed by an attorney-in-fact.

The vehicles are essentially owned by their policyholders, but their operations, such as underwriting, claims and management services, are provided by an attorney-in-fact for a pre-agreed fee.

ReAlign did not immediately respond to a request for comment.