Privilege Underwriters, Inc. (PUI), a member of Tokio Marine Group, and its subsidiary PURE Specialty Risk Management, LLC, have announced the formation of a new domestic surplus lines insurer called PURE Specialty Exchange (PSE).
Through PSE, the group – which caters to high net worth (HNW) individuals across the United States, using a reciprocal exchange model – will help PURE members and other HNW families with higher-risk, complex exposures that fall outside of the admitted market. The launch follows a surge in demand for excess and surplus (E&S) lines solutions after admitted markets contracted in response to historical profitability challenges, regulatory limitations, and the rising frequency and severity of catastrophic weather events.
PSE is the second non-admitted business launched by PUI. It joins PURE Programs, a managing general underwriter (MGU) that was created to provide E&S solutions for PURE members and other HNW families with hard-to-place exposures that didn’t fit into PURE Insurance’s intentionally narrow underwriting guidelines or the rate and form constraints, or the insurer’s ultra-preferred admitted exchange.
“PURE Programs is now in its sixth year, and, during that time, we’ve manufactured lots of different solutions and we’ve been able to serve thousands of PURE members across the country,” said Mark Galante (pictured), president of PURE Specialty Risk Management, LLC and PURE Programs, LLC. “We’ve done so by creating partnerships with third-party carriers, and we’re really proud of the relationships we’ve created – but in building out PURE Programs, a couple of things became abundantly clear.
“One was that we were going to need lots of additional capacity to be able to fulfill the needs of the growing PURE membership, and no single partnership alone would be able to do that. The second realization was that it would be great to have the option to create some of these solutions on our own paper. Then the question became: how do we do that? And the answer was right in front of us. We looked at the reciprocal exchange structure that has contributed to PURE’s success, and we […] decided to structure a non-admitted, domestic surplus lines insurer as a reciprocal exchange, where we can leverage the same benefits behind PURE.”
The need for the ability to manufacture non-admitted solutions became clear very early on in the history of PURE. Galante explained how the insurer would regularly come across successful and responsible HNW individuals with significant assets to protect, but certain risks within their portfolios did not fit into PURE’s appetite, so they either had to relinquish or share the business.
“That wasn’t the outcome we wanted to achieve,” he told Insurance Business. “We wanted to be able to create comprehensive solutions for all of their needs. Hence, we began doing so with PURE Programs. But with E&S comes a little bit of natural volatility, where companies participating in the market often come and go, and we wanted to ensure that we had an entity that gave us great control. Ultimately, by having our own paper, we would be able to minimize that volatility of [relying on other companies that are] coming and going, in that we would be using our own risk entity.
“We also realized that creating our own surplus lines insurance company would give us the ability to demonstrate even greater alignment of interest with our PURE Program partners (those third-party carriers with whom we’re writing business) because we can use PSE as a vehicle to be a reinsurance participant in those programs, so we can assume some of the risk being written as a quota share participant.
“PSE provides a lot of advantages to us strategically. It gives us more control, it gives us optionality down the road, it allows us to show greater alignment of interest with our partners on the program side, and, importantly, it allows us to leverage the benefits of the reciprocal structure to generate capital efficiently and also demonstrate an alignment of interest with all of our stakeholders.”
PSE will begin accepting new members and renewal business later in spring 2022. Its initial writings will include various high value homeowners offerings in Alabama, Georgia, Louisiana, Massachusetts, Mississippi, North Carolina, New Jersey, and South Carolina. These offerings are designed for owners of high value homes and condominiums with specific, challenging exposures including frequently rented-to-others, coastal locations and prior losses.
The E&S insurer will also launch a California high value homeowners’ program, designed for primary and secondary homes with replacement values of $1 million or more, with a focus on high-quality risk profiles recently dislocated by carrier contraction. Also in 2022, PSE plans to launch a group personal excess liability program, where coverage will be sold as a voluntary employee benefit.
“The needs of the PURE membership – where we help over 106,000 HNW families with significant assets to protect – are only growing,” said Galante. “And when we look to the future, we expect our membership to grow much larger than it is today, so you can just imagine the insurance needs that will create – whether it’s for more homes in Florida or California, or more construction projects, the list goes on and on. We’re going to need lots of partners, and we’re going to have to manufacture lots of our own solutions – and with the combination of PURE Programs and PSE, we now have greater power and flexibility to meet our members’ needs.”
