UFG Insurance is looking to diversify across the U.S. by expanding into assumed reinsurance business – partly via quota share arrangements, such as the recently announced deal with Topsail Re, a Cayman Islands-based reinsurer.

“We’re looking to grow on a more national scale, and we want to diversify our overall risk profile. This is one channel, one way to accomplish that goal,” said UFG Vice President and Chief Risk Officer Micah Woolstenhulme, who is leading the company’s reinsurance strategy.

Under a program management agreement, Topsail will underwrite and manage commercial casualty, commercial auto and personal auto business on behalf of United Fire & Casualty, which is a subsidiary of UFG Insurance, headquartered in Cedar Rapids, Iowa.

It’s a win-win for both companies because UFG is seeking to expand its business across the U.S., while Topsail wants to provide additional capacity to its cedents, he explained in an interview with Insurance Journal.

Woolstenhulme described United Fire as a super-regional package underwriter, with its biggest class of business being contractors and its biggest state currently Texas, followed by California, Iowa and Missouri.

Under the agreement with Topsail, UFG will participate on the reinsurance panel for quota share reinsurance treaties, sourced by Topsail Re Underwriters, which is Topsail Re’s Greensboro, N.C.-based underwriting agency.

“The actuarial analysis and underwriting is performed by Topsail Underwriters in North Carolina, but we have our balance sheet and we’re offering additional capacity on business they already would be authorizing – to basically extend their participation on those treaties,” he continued.

Topsail Chief Executive Officer David Johnson explained that this is treaty business that his company already has on its balance sheet.

“But our partnership with UFG allows us to expand our line size on particular programs or allows us to grow and do more programs and diversify while also giving them more diversity,” said Johnson in the same interview.

“We’re doing exactly the business that we would be doing anyway. It’s just that we’re now able to offer the broker and the cedent a participation from both Topsail Re and UFG,” Johnson said, noting that quota share business represents more than 90% of the company’s premiums.

With the UFG arrangement, Topsail will continue to write its portion of the risk on Topsail paper, while UFG’s portion of the risk will be on UFC paper. The quota share agreement requires that Topsail assumes more risk than UFG, “so Topsail will always have an equal or greater share than UFG on a particular transaction,” explained Johnson.

Perfect Fit

“This relationship with Topsail is a perfect fit for us, given their expertise in this type of reinsurance. So this fits into our overall strategy of growing our reinsurance operations,” said Woolstenhulme.

During 2020, 3% of UFG’s net premium written was reinsurance – both in the quota-share and excess areas – so there’s plenty of room to grow.

Woolstenhulme would not, at this time, reveal how much these quota-share arrangements or its excess reinsurance business would increase its net written premiums.

“Our answer to that question is that this is part of a strategy to expand the reinsurance capacity that we’re providing in a material way across multiple lines of business, including those that are subject to this agreement with Topsail,” he said.

Prior to the February 2020 announcement about the quota share deal with Topsail Re, UFG announced it had formed another program management agreement – this time with Waypoint Underwriting Management. Based in Basking Ridge, N.J., Waypoint is a specialty reinsurance managing general underwriter that offers property/casualty and accident and health solutions to insurers.

Effective Nov. 1, 2020, Waypoint began underwriting and managing workers’ compensation reinsurance on behalf of United Fire & Casualty Co.

“We’re really excited about these agreements,” Woolstenhulme affirmed. We think it’s a unique way to bring more reinsurance capacity to the market…. We think it’s going to be a real meaningful source of capacity for certain cedents.”

*This story ran previously in our sister publication Insurance Journal.

Topics USA Underwriting Reinsurance