UFG Insurance

UFG Insurance is looking to diversify across the United States by expanding into assumed reinsurance business, partly through quota sharing agreements like the one with Topsail Re, a Cayman Islands-based reinsurer recently announced.

"We want to expand on a national scale and diversify our overall risk profile," says the company. Micah Woolstenhulme, UFG Vice President and Chief Risk Officer, who is in charge of the company's reinsurance strategy, said, "This is one channel, one way to accomplish that goal."

Topsail will underwrite and administer commercial casualty, commercial auto, and personal auto company on behalf of United Fire & Casualty, a UFG Insurance subsidiary in Cedar Rapids, Iowa, under a program management agreement.

In an interview with Insurance Journal, he clarified that it's a win-win situation for both companies because UFG wants to grow its business across the United States. In contrast, Topsail intends to provide additional capacity to its clients.

Micah Woolstenhulme is a writer who lives in the United Kingdom.

According to Woolstenhulme, United Fire is a super-regional package underwriter, with contractors as its largest class of company and Texas as its most extensive state, followed by California, Iowa, and Missouri.

Under the terms of the agreement with Topsail, UFG will be a member of the reinsurance panel for quota share reinsurance treaties sourced by Topsail Re Underwriters, Topsail Re's underwriting agency in Greensboro, N.C.

"Topsail Underwriters in North Carolina does the actuarial analysis and underwriting," he added, "but we have our balance sheet, and we're providing additional flexibility on business they already will be approving – to expand their involvement in those treaties effectively."

According to Topsail Chief Executive Officer David Johnson, this is a treaty business that his organization already has on its books.

Johnson, David D.

"However, our relationship with UFG helps us to increase the size of our line on specific programs or to develop and do more programs and diversify while also giving them more diversity," Johnson said in the same interview.

"We're doing just what we'd be doing anyway," says the narrator. It's just that we're now able to sell both Topsail Re and UFG participation to the broker and cedent," Johnson explained, adding that the quota share sector accounts for more than 90% of the company's premiums.

Topsail will continue to write its portion of the danger on Topsail paper under the UFG agreement, while UFG will write its bit on UFC paper. According to Johnson, the quota sharing arrangement allows Topsail to take on more risk than UFG, "so Topsail will always have an equivalent or greater share than UFG on a particular deal."

Exactly Right

"Given Topsail's experience in this form of reinsurance, this partnership with them is a great match for us. As a result, this is consistent with our overall strategy of expanding our reinsurance operations," Woolstenhulme said.

Reinsurance accounted for 3% of UFG's net premium written in 2020, both in the quota-share and excess zones, so there's plenty of space for expansion.

Woolstenhulme wouldn't say how much these quota-share agreements or its excess reinsurance company would boost its net written premiums at this time.

"Our response to that query is that this is part of a plan to substantially increase the reinsurance ability that we provide across various lines of business, including those protected by this agreement with Topsail," he said.

Before the announcement of the quota sharing agreement with Topsail in February 2020, UFG announced the formation of another program management agreement, this time with Waypoint Underwriting Management. Waypoint is a specialty reinsurance managing general underwriter based in Basking Ridge, New Jersey, that provides property/casualty and accident and health solutions to insurers.

Waypoint started underwriting and administering workers' compensation reinsurance on behalf of United Fire & Casualty Co. on November 1, 2020.

Woolstenhulme said, "We're very excited about these agreements." We assume it is a novel approach to growing reinsurance potential in the industry. We believe it will be a significant source of capacity for some cedents."