Velocity Risk Underwriters, the catastrophe exposed property insurance specialist managing general agency (MGA) operation, is set to exit the homeowners insurance marketplace, according to Artemis.
Risk is well-known to our readers as the MGA unit that insurance-linked securities (ILS) manager Nephila Capital had established and Velocity was an exclusively source of program business for funds under the management of Nephila.
Velocity Risk was sold by Nephila to funds managed by global investment specialist Oaktree Capital Management, L.P. in 2022, securing a monetization event for Nephila’s owner Markel.
We’ve now learned that, effective May 26th, Velocity Risk Underwriters has ceased writing new homeowners insurance business and has begun the process of exiting all of its homeowner programs.
On the non-admitted side, that means an exit as fast as state specific regulations will allow the MGA, while in the admitted marketplace Velocity Risk will need to follow the withdrawal guidelines, we’re told.
No reason was given, we’re told, with Velocity Risk simply stating that, “After careful consideration and evaluation of various factors, we have made the difficult decision to permanently exit the homeowner’s market.”
Of course, there are likely to be numerous reasons for the move, but possibly driving it, at least to a degree, will be the performance of homeowners insurance business over recent years in catastrophe exposed regions of the United States.
With significant insured catastrophe losses, both from major events such as hurricanes and wildfires, but also from more attritional and so-called secondary perils, such as severe weather, rainfall, flooding and winter storms, the homeowners insurance market has been challenged.
With rising reinsurance costs as well, the cost of writing homeowners business has certainly risen and the margins likely compressed, given the challenging loss environment.
The Velocity Risk website no longer mentions residential or homeowners business, aside from a contact detail or agent servicing, while the product listing only speaks about middle market and small business covers.
Coming on the heels of the news that State Farm is exiting the property insurance market in California, citing “historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” it’s likely these reasons align with Velocity Risk’s, at least in part.
For a catastrophe exposed property writing specialist like Velocity Risk to pull out of the homeowners insurance business altogether is notable though. It does leave you wondering, who could be next?
This news also ties in well with and may go some way towards explaining the reasoning sitting behind our story from earlier this week, that Velocity Risk is set to acquire E&S insurance carrier Independent Specialty Insurance Company (ISIC) from Markel’s State National unit.