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Reinsurance | 6 Months Ended
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Jun. 30, 2024
Insurance [Abstract] |
Reinsurance | 10. Reinsurance The Company purchases reinsurance to help manage exposure to property and casualty insurance risks, including attritional and catastrophic risks. The Company’s insurance company subsidiaries have entered into both proportional and non-proportional reinsurance treaties. The Company also assumes risk from non-affiliated insurance carriers. Proportional Reinsurance Treaties — Hippo Home Insurance Program In 2024, the Company started transitioning from proportional reinsurance to a more traditional excess of loss (XOL) reinsurance structure, retaining nearly all the attritional risk and related premium, and purchasing XOL reinsurance to protect against major catastrophic weather events. For the Company’s primary homeowners reinsurance program for policies with effective dates in 2024, the Company elected not to purchase proportional reinsurance and to retain more of the exposure and associated premium. For business produced through the Company’s builder channel for policies with effective dates in 2024, the Company purchased proportional reinsurance from one third-party reinsurer and expects to retain approximately 85% of the premium and associated risk, before purchasing catastrophic protection. All reinsurance obligations are appropriately collateralized. The reinsurance contracts are subject to contingent commission adjustments and limited loss participation features, which align the Company’s interests with those of the reinsurers. For the Company’s primary homeowners reinsurance treaty for policies with effective dates in 2023, the Company secured proportional reinsurance from a diverse panel of six third-party reinsurers. All reinsurers are either rated “A-” Excellent or better by AM Best, or the reinsurance is appropriately collateralized. In 2023, the Company retained approximately 40% of the premium through its insurance company subsidiaries or its captive reinsurance company, RH Solutions Insurance (Cayman) Ltd. (“RHS”), before purchasing catastrophe protection. Effective January 1, 2024, the Company elected to cut off 25% of the reinsurer’s participation on the 2023 proportional reinsurance treaty and retain the remaining exposure and related premiums. For business produced through the Company’s builder channel for policies with effective dates in 2023, the Company purchased proportional reinsurance from three third-party reinsurers. All reinsurers are rated “A-” Excellent or better by AM Best, or the reinsurance is appropriately collateralized. In 2023, the Company retained approximately 58% of the premium produced through the Company’s insurance company subsidiaries or RHS, before purchasing catastrophe protection. For the Company’s primary homeowners reinsurance treaty for policies with effective dates in 2022, the Company secured proportional reinsurance from a diverse panel of eleven third-party reinsurers with AM Best ratings of “A-” Excellent or better. A total of approximately 10% of the premium was retained through the Company’s insurance company subsidiaries, including the Company’s captive reinsurance company, RHS. The Company also seeks to further reduce its risk retention through purchases of non-proportional reinsurance described below. Non-Proportional Reinsurance — Hippo Home Insurance Program The Company purchases non-proportional excess of loss catastrophe coverage (“XOL”) reinsurance which includes traditional reinsurance protection, state subsidized reinsurance protection, catastrophe bonds, and industry loss warranty products. Through the Company’s insurance company subsidiaries, the Company is exposed to the risk of natural catastrophe events that could occur on the risks arising from policies underwritten by the Company or other managing general agents (“MGAs”). The Company is also exposed to this risk through its captive reinsurer, which takes on a share of the risk underwritten by the Company’s MGA business. In May 2023, the Company secured new catastrophe protection through a per occurrence XOL reinsurance agreement with Mountain Re Ltd. (“Mountain Re”), an independent Bermuda company, licensed as a Special Purpose Insurer. The reinsurance agreement meets the requirements to be accounted for as reinsurance in accordance with the guidance for reinsurance contracts. In connection with the reinsurance agreement, Mountain Re issued notes (generally referred to as “catastrophe bonds”) to investors, consistent with the amount of coverage provided under the reinsurance agreement. The reinsurance agreement provides the Company with coverage through June 2026, and pursuant to the agreement, Mountain Re provides XOL reinsurance coverage to the Company for losses from a variety of perils, including named storms, fire following an earthquake, severe thunderstorms, and winter storms on business produced through the Hippo MGA. Under the terms of the reinsurance agreement, the Company is obligated to pay annual reinsurance premiums to Mountain Re for the reinsurance coverage which inures to the benefit of the Company’s traditional XOL program described below. Amounts payable under the reinsurance agreement with respect to any covered event cannot exceed the Company’s actual losses from such event. The Company’s XOL program provides protection to the Company from catastrophes that could impact a large number of insurance policies. In 2023, the Company purchased XOL reinsurance so that the probability of losses from a single occurrence exceeding the protection purchase was no more than 0.4%. In 2024, the Company increased its purchase of non-proportional XOL reinsurance, raising the per occurrence XOL limit by 11% and increasing the number of participating reinsurers from 14 to 19. Under this placement, along with other existing catastrophe protections, the Company is protected on the upper layers of risk up to a 1 in 250-year event when considering the Mountain Re per occurrence, described above, corporate catastrophe, and the Florida Hurricane Catastrophe Fund (the “FHCF”) XOL described below under “Other Reinsurance.” The reinsurance protects the Company from all but the most severe catastrophic events. Other Reinsurance Spinnaker Insurance Company (“Spinnaker”) purchases reinsurance for programs written by MGAs other than Hippo through its Insurance-as-a-Service business. The reinsurance treaties are a mix of proportional and XOL in which generally 75% to 100% of the risk, up to the 1 in 250 year return period, is ceded. The reinsurance contracts are subject to variable commission adjustments and loss participation features, including loss caps, which may increase the amount of losses retained by the Company in excess of the Company’s pro-rata participation. Such provisions are recognized in the period based on the experience to date under the agreement. Spinnaker purchases a corporate catastrophe XOL program that attaches above the individual programmatic reinsurance programs protecting the property business written by Hippo as well as the other MGAs. This treaty has a floating retention and attaches at the exhaustion point of the underlying programs’ specific reinsurance. The catastrophe bond, and the FHCFs, described below, inures to the benefit of this contract. This program provides the Company protection from catastrophes that could impact a large number of correlated insurance policies underwritten by the Company and its other MGAs. The Company buys this XOL so that the probability of losses from a single occurrence across the property portfolio exceeding the protection purchased is no more than 0.4%, or equivalent to a 1 in 250-year return period. This reinsurance protects the Company from all but the most severe catastrophic events. Spinnaker also purchases reinsurance from the State Board of Administration in Florida via the FHCF annually for admitted residential hurricane losses in Florida. This coverage is provided and required by the State of Florida and protects business written by Hippo as well as other MGAs that produce admitted residential policies. The Company currently purchases reimbursement protection at the maximum level (90%) of mandatory coverage offered by the FHCF. With all reinsurance programs, the Company’s wholly owned insurance carriers are not relieved of their primary obligations to policyholders in the event of a default or the insolvency of their reinsurers. As a result, credit exposure exists to the extent that any reinsurer fails to meet its obligations assumed in the reinsurance agreements. To mitigate this exposure to reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and, in certain circumstances, holds substantial collateral (in the form of funds withheld, qualified trusts, and letters of credit) as security under the reinsurance agreements. No allowance has been recorded in the three and six months ended June 30, 2024, and 2023 for amounts anticipated to be uncollectible or for the anticipated failure of a reinsurer to meet its obligations under the contracts. The following tables reflect amounts affecting the condensed consolidated statements of operations and comprehensive loss for reinsurance as of and for the three and six months ended June 30, 2024, and 2023 (in millions).
| For the Three Months Ended June 30,
| 2024 |  | 2023
| Written premiums |  | Earned premiums |  | Loss and LAE incurred |  | Written premiums |  | Earned premiums |  | Loss and LAE incurred
Direct | $ | 255.0 |  |  | $ | 208.3 |  |  | $ | 119.2 |  |  | $ | 240.2 |  |  | $ | 185.4 |  |  | $ | 196.0 |
Assumed | 2.6 |  |  | 3.9 |  |  | 4.0 |  |  | 4.6 |  |  | 1.9 |  |  | 4.0 |
Gross | 257.6 |  |  | 212.2 |  |  | 123.2 |  |  | 244.8 |  |  | 187.3 |  |  | 200.0 |
Ceded | (163.8) |  |  | (147.8) |  |  | (62.8) |  |  | (213.6) |  |  | (165.0) |  |  | (123.3) |
Net | $ | 93.8 |  |  | $ | 64.4 |  |  | $ | 60.4 |  |  | $ | 31.2 |  |  | $ | 22.3 |  |  | $ | 76.7 |
| For the Six Months Ended June 30,
| 2024 |  | 2023
| Written premiums |  | Earned premiums |  | Loss and LAE incurred |  | Written premiums |  | Earned premiums |  | Loss and LAE incurred
Direct | $ | 443.6 |  |  | $ | 410.8 |  |  | $ | 236.5 |  |  | $ | 425.9 |  |  | $ | 349.5 |  |  | $ | 320.7 |
Assumed | 8.8 |  |  | 8.1 |  |  | 7.9 |  |  | 8.3 |  |  | 2.8 |  |  | 5.6 |
Gross | 452.4 |  |  | 418.9 |  |  | 244.4 |  |  | 434.2 |  |  | 352.3 |  |  | 326.3 |
Ceded | (249.7) |  |  | (294.0) |  |  | (131.4) |  |  | (381.7) |  |  | (316.2) |  |  | (211.9) |
Net | $ | 202.7 |  |  | $ | 124.9 |  |  | $ | 113.0 |  |  | $ | 52.5 |  |  | $ | 36.1 |  |  | $ | 114.4 |
As of June 30, 2024 and December 31, 2023, a provision for sliding scale commissions of $31.1 million and $23.8 million, respectively, is included in provision for commission on the condensed consolidated balance sheets. As of June 30, 2024 and December 31, 2023, a receivable for sliding scale commissions of $2.5 million and $5.8 million, respectively, is included in ceding commissions receivable on the condensed consolidated balance sheets. As of June 30, 2024 and December 31, 2023, a provision for loss participation features of $42.2 million and $112.8 million, respectively, was recorded as a contra-asset in reinsurance recoverable on the condensed consolidated balance sheets.

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- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479838/944-20-50-3 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479838/944-20-50-4 Reference 3: http://www.xbrl.org/2003/role/exampleRef -Topic 944 -SubTopic 605 -Name Accounting Standards Codification -Section 55 -Paragraph 12 -Publisher FASB -URI https://asc.fasb.org/1943274/2147477548/944-605-55-12 Reference 4: http://www.xbrl.org/2003/role/exampleRef -Topic 944 -SubTopic 605 -Name Accounting Standards Codification -Section 55 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org/1943274/2147477548/944-605-55-15 + Details
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