HCIグループの四半期報告

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-Q


☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number

001-34126

HCI Group, Inc.

(Exact name of registrant as specified in its charter)


Florida		20-5961396
(State of Incorporation)		(IRS Employer Identification No.)

3802 Coconut Palm Drive
Tampa, FL 33619
(Address, including zip code, of principal executive offices)

(813) 849-9500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Shares, no par value	HCI	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☑	Non-accelerated filer ☐	Smaller reporting company ☐
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The aggregate number of shares of the registrant’s common stock, no par value, outstanding on August 1, 2024 was 10,472,741.

HCI GROUP, INC. AND SUBSIDIARIES

TABLE OF CONTENTS


		Page

PART I – FINANCIAL INFORMATION

Item 1	Financial Statements
	Consolidated Balance Sheets:
	June 30, 2024 (unaudited) and December 31, 2023	1-2
	Consolidated Statements of Income:
	Three and six months ended June 30, 2024 and 2023 (unaudited)	3
	Consolidated Statements of Comprehensive Income:
	Three and six months ended June 30, 2024 and 2023 (unaudited)	4
	Consolidated Statements of Equity:
	Three and six months ended June 30, 2024 and 2023 (unaudited)	5-8
	Consolidated Statements of Cash Flows:
	Three and six months ended June 30, 2024 and 2023 (unaudited)	9-11
	Notes to Consolidated Financial Statements (unaudited)	12-47

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48-60

Item 3	Quantitative and Qualitative Disclosures About Market Risk	61-62

Item 4	Controls and Procedures	63


PART II – OTHER INFORMATION

Item 1	Legal Proceedings	64

Item 1A	Risk Factors	64

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	64-65

Item 3	Defaults Upon Senior Securities	65

Item 4	Mine Safety Disclosures	65

Item 5	Other Information	65

Item 6	Exhibits	66-72

Signatures		73

Certifications

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollar amounts in thousands)


	June 30,		December 31,
	2024		2023
	(Unaudited)
Assets
Fixed-maturity securities, available for sale, at fair value (amortized cost: $643,892 and $387,687, respectively and allowance for credit losses: $0 and $0, respectively)	$	640,242	$	383,238
Equity securities, at fair value (cost: $49,192 and $44,011 respectively)		53,886		45,537
Limited partnership investments		21,856		23,583
Real estate investments		73,507		67,893
Total investments		789,491		520,251
Cash and cash equivalents (a)		445,829		536,478
Restricted cash (a)		3,303		3,287
Receivable from maturities of fixed-maturity securities		500		91,085
Accrued interest and dividends receivable		7,067		3,507
Income taxes receivable (a)		2,820		—
Deferred income taxes, net		—		512
Premiums receivable, net (allowance: $4,321 and $3,152, respectively) (a)		58,114		38,037
Assumed premiums receivable (a)		7,562		19,954
Prepaid reinsurance premiums (a)		123,955		86,232
Reinsurance recoverable, net of allowance for credit losses:
Paid losses and loss adjustment expenses (allowance: $0 and $0, respectively)		23,367		19,690
Unpaid losses and loss adjustment expenses (allowance: $66 and $118, respectively)		279,795		330,604
Deferred policy acquisition costs (a)		52,564		42,910
Property and equipment, net		29,449		29,251
Right-of-use assets - operating leases		1,296		1,407
Intangible assets, net		6,432		7,659
Funds withheld for assumed business		14,353		30,087
Other assets (a)		65,484		50,365
Total assets	$	1,911,381	$	1,811,316

(a)

See Note 13 for details of balances associated with consolidated variable interest entity.

(continued)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets – (Continued)

(Dollar amounts in thousands)


	June 30,			December 31,
	2024			2023
	(Unaudited)
Liabilities and Equity
Losses and loss adjustment expenses (a)	$	571,646		$	585,073
Unearned premiums (a)		542,839			501,157
Advance premiums (a)		24,119			15,895
Reinsurance payable on paid losses and loss adjustment expenses		—			3,145
Ceded reinsurance premiums payable (a)		7,950			8,921
Assumed premiums payable		—			850
Accrued expenses (a)		27,860			19,722
Income tax payable		8,962			7,702
Deferred income taxes, net (a)		4,328			—
Revolving credit facility		48,000			—
Long-term debt		184,912			208,495
Lease liabilities – operating leases		1,305			1,408
Other liabilities (a)		35,426			35,623
Total liabilities		1,457,347			1,387,991
Commitments and contingencies (Note 21)
Redeemable noncontrolling interests (Note 18)		791			96,160
Equity:
Common stock (no par value, 40,000,000 shares authorized, 10,472,741 and 9,738,183 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively)		—			—
Additional paid-in capital		117,968			89,568
Retained income		331,960			238,438
Accumulated other comprehensive loss, net of taxes		(2,579	)		(3,163	)
Total stockholders’ equity		447,349			324,843
Noncontrolling interests		5,894			2,322
Total equity		453,243			327,165
Total liabilities, redeemable noncontrolling interests and equity	$	1,911,381		$	1,811,316

(a)

See Note 13 for details of balances associated with consolidated variable interest entity.

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(Unaudited)

(Dollar amounts in thousands, except per share amounts)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Revenue
Gross premiums earned	$	263,561		$	181,946		$	520,205		$	362,014
Premiums ceded		(76,713	)		(66,390	)		(144,819	)		(136,899	)
Net premiums earned		186,848			115,556			375,386			225,115
Net investment income		16,881			8,794			30,948			26,509
Net realized investment gains (losses)		212			(230	)		212			(1,379	)
Net unrealized investment gains		533			897			3,168			1,426
Policy fee income		1,089			1,469			2,108			2,559
Other		682			841			1,037			2,126
Total revenue		206,245			127,327			412,859			256,356
Expenses
Losses and loss adjustment expenses		78,324			61,890			158,246			122,455
Policy acquisition and other underwriting expenses		23,452			22,618			45,591			45,338
General and administrative personnel expenses		17,471			14,272			33,745			27,774
Interest expense		3,452			2,667			6,601			5,468
Other operating expenses		7,520			5,614			15,220			11,919
Total expenses		130,219			107,061			259,403			212,954
Income before income taxes		76,026			20,266			153,456			43,402
Income tax expense		18,927			5,384			39,401			10,727
Net income		57,099			14,882			114,055			32,675
Net income attributable to redeemable noncontrolling interests (Note 18)		—			(2,337	)		(10,149	)		(4,661	)
Net income attributable to noncontrolling interests		(3,023	)		(102	)		(2,219	)		(233	)
Net income after noncontrolling interests	$	54,076		$	12,443		$	101,687		$	27,781
Basic earnings per share	$	5.18		$	1.45		$	9.95		$	3.23
Diluted earnings per share	$	4.24		$	1.28		$	8.04		$	2.81

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollar amounts in thousands)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Net income	$	57,099		$	14,882		$	114,055		$	32,675
Other comprehensive income:
Change in unrealized gain (loss) on investments:
Net unrealized gains (losses) arising during the period		705			(2,263	)		757			152
Reclassification adjustment for net realized losses (gains)		10			12			42			750
Net change in unrealized gains (losses)		715			(2,251	)		799			902
Deferred income taxes on above change		(179	)		571			(200	)		2,381
Total other comprehensive income (loss), net of income taxes		536			(1,680	)		599			3,283
Comprehensive income		57,635			13,202			114,654			35,958
Comprehensive income attributable to noncontrolling interests		(3,036	)		(42	)		(2,234	)		(348	)
Comprehensive income after noncontrolling interests	$	54,599		$	13,160		$	112,420		$	35,610

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Equity

For the Three Months Ended June 30, 2024

(Unaudited)

(Dollar amounts in thousands, except per share amount)


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Loss,			Total Stockholders’			Noncontrolling		Total
	Shares			Amount		Capital			Income			Net of Tax			Equity			Interests		Equity
Balance at March 31, 2024		10,276,463		$	—	$	116,728		$	282,056		$	(3,102	)	$	395,682		$	2,188	$	397,870
Net income		—			—		—			54,076			—			54,076			3,023		57,099
Total other comprehensive income, net of income taxes		—			—		—			—			523			523			13		536
Issuance of restricted stock		204,500			—		—			—			—			—			—		—
Forfeiture of restricted stock		(3,500	)		—		—			—			—			—			—		—
Repurchase and retirement of common stock		(4,722	)		—		(480	)		—			—			(480	)		—		(480	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			597		597
Common stock dividends ($0.40 per share)		—			—		—			(4,172	)		—			(4,172	)		—		(4,172	)
Stock-based compensation		—			—		1,720			—			—			1,720			—		1,720
Subscriber surplus contribution		—			—		—			—			—			—			73		73
Balance at June 30, 2024		10,472,741		$	—	$	117,968		$	331,960		$	(2,579	)	$	447,349		$	5,894	$	453,243

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Equity – (Continued)

For the Three Months Ended June 30, 2023

(Unaudited)

(Dollar amounts in thousands, except per share amount)


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Loss,			Total Stockholders’			Noncontrolling			Total
	Shares			Amount		Capital			Income			Net of Tax			Equity			Interests			Equity
Balance at March 31, 2023		8,596,673		$	—	$	332		$	185,028		$	(5,098	)	$	180,262		$	(405	)	$	179,857
Net income		—			—		—			14,613			—			14,613			269			14,882
Net income attributable to redeemable noncontrolling interests		—			—		—			(2,170	)		—			(2,170	)		(167	)		(2,337	)
Total other comprehensive loss, net of income taxes		—			—		—			—			(1,620	)		(1,620	)		(60	)		(1,680	)
Issuance of restricted stock		7,000			—		—			—			—			—			—			—
Forfeiture of restricted stock		(295	)		—		—			—			—			—			—			—
Repurchase and retirement of common stock		(8,614	)		—		(479	)		—			—			(479	)		—			(479	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			619			619
Common stock dividends ($0.40 per share)		—			—		—			(3,437	)		—			(3,437	)		—			(3,437	)
Stock-based compensation		—			—		1,209			—			—			1,209			—			1,209
Balance at June 30, 2023		8,594,764		$	—	$	1,062		$	194,034		$	(6,718	)	$	188,378		$	256		$	188,634

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Equity – (Continued)

For the Six Months Ended June 30, 2024

(Unaudited)

(Dollar amounts in thousands, except per share amount)


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Loss,			Total Stockholders’			Noncontrolling			Total
	Shares			Amount		Capital			Income			Net of Tax			Equity			Interests			Equity
Balance at December 31, 2023		9,738,183		$	—	$	89,568		$	238,438		$	(3,163	)	$	324,843		$	2,322		$	327,165
Net income		—			—		—			111,161			—			111,161			2,894			114,055
Net income attributable to redeemable noncontrolling interests		—			—		—			(9,474	)		—			(9,474	)		(675	)		(10,149	)
Total other comprehensive income, net of income taxes		—			—		—			—			584			584			15			599
Cashless exercise of common stock warrants		155,049			—		—			—			—			—			—			—
Issuance of restricted stock		204,500			—		—			—			—			—			—			—
Forfeiture of restricted stock		(3,700	)		—		—			—			—			—			—			—
Repurchase and retirement of common stock		(10,378	)		—		(1,036	)		—			—			(1,036	)		—			(1,036	)
Conversion of senior notes to common stock		389,087			—		23,449			—			—			23,449			—			23,449
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			1,265			1,265
Common stock dividends ($0.80 per share)		—			—		—			(8,165	)		—			(8,165	)		—			(8,165	)
Stock-based compensation		—			—		2,601			—			—			2,601			—			2,601
Deemed dividend on warrant modification		—			—		3,386			—			—			3,386			—			3,386
Subscriber surplus contribution		—			—		—			—			—			—			73			73
Balance at June 30, 2024		10,472,741		$	—	$	117,968		$	331,960		$	(2,579	)	$	447,349		$	5,894		$	453,243

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Equity – (Continued)

For the Six Months Ended June 30, 2023

(Unaudited)

(Dollar amounts in thousands, except per share amount)


	Common Stock					Additional Paid-In			Retained			Accumulated Other Comprehensive Loss,			Total Stockholders’			Noncontrolling			Total
	Shares			Amount		Capital			Income			Net of Tax			Equity			Interests			Equity
Balance at December 31, 2022		8,598,682		$	—	$	—		$	172,482		$	(9,886	)	$	162,596		$	(1,342	)	$	161,254
Net income		—			—		—			32,101			—			32,101			574			32,675
Net income attributable to redeemable noncontrolling interests		—			—		—			(4,320	)		—			(4,320	)		(341	)		(4,661	)
Total other comprehensive income, net of income taxes		—			—		—			—			3,168			3,168			115			3,283
Issuance of restricted stock		13,000			—		—			—			—			—			—			—
Forfeiture of restricted stock		(2,420	)		—		—			—			—			—			—			—
Repurchase and retirement of common stock		(14,498	)		—		(784	)		—			—			(784	)		—			(784	)
Dilution from subsidiary stock-based compensation		—			—		—			—			—			—			1,250			1,250
Common stock dividends ($0.80 per share)		—			—		—			(6,869	)		—			(6,869	)		—			(6,869	)
Stock-based compensation		—			—		2,486			—			—			2,486			—			2,486
Additional paid-in capital shortfall adjustment allocated to retained income		—			—		(640	)		640			—			—			—			—
Balance at June 30, 2023		8,594,764		$	—	$	1,062		$	194,034		$	(6,718	)	$	188,378		$	256		$	188,634

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Dollar amounts in thousands)


	Six Months Ended
	June 30,
	2024			2023
Cash flows from operating activities:
Net income after noncontrolling interests	$	101,687		$	27,781
Net income attributable to noncontrolling interests		12,368			4,894
Net income		114,055			32,675
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation expense		3,958			3,973
Net accretion of discount on investments in fixed-maturity securities		(2,436	)		(1,671	)
Depreciation and amortization		(46	)		4,229
Deferred income tax expense		4,640			3,810
Net realized investment (gains) losses		(212	)		1,379
Net unrealized investment gains		(3,168	)		(1,426	)
Credit loss expense - reinsurance recoverable		(52	)		(102	)
Net income from limited partnership interests		(85	)		(542	)
Distributions received from limited partnership interests		626			421
Loss on extinguishment of debt		—			177
Gain on sales of real estate investments		—			(8,936	)
Foreign currency remeasurement loss (gain)		31			(1	)
Other non-cash items		332			87
Changes in operating assets and liabilities:
Accrued interest and dividends receivable		(3,560	)		(338	)
Income taxes		(1,560	)		3,017
Premiums receivable, net		(20,077	)		(5,308	)
Assumed premiums receivable		12,392			—
Prepaid reinsurance premiums		(37,723	)		(48,035	)
Reinsurance recoverable		47,184			137,770
Deferred policy acquisition costs		(9,654	)		415
Funds withheld for assumed business		15,734			3,005
Other assets		(15,082	)		(14,614	)
Losses and loss adjustment expenses		(13,427	)		(114,810	)
Unearned premiums		41,682			17,823
Advance premiums		8,224			8,250
Assumed reinsurance balances payable		(850	)		—
Reinsurance payable on paid losses and loss adjustment expenses		(3,145	)		(1,563	)
Reinsurance recovered in advance on unpaid losses		—			(19,863	)
Ceded reinsurance premiums payable		(971	)		(12,255	)
Accrued expenses and other liabilities		16,175			18,377
Net cash provided by operating activities		152,985			5,944

(continued)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows – (Continued)

(Unaudited)

(Dollar amounts in thousands)


	Six Months Ended
	June 30,
	2024			2023
Cash flows from investing activities:
Investments in limited partnership interests		(1,106	)		—
Return of excess investments in limited partnership interests		—			112
Distributions received from limited partnership interests		2,292			2,596
Distribution received from unconsolidated joint venture		—			18
Purchase of property and equipment		(2,039	)		(2,762	)
Purchase of real estate investments		(9,909	)		(744	)
Purchase of fixed-maturity securities		(494,390	)		(227,540	)
Purchase of equity securities		(12,048	)		(10,271	)
Purchase of short-term and other investments		—			(81	)
Proceeds from sales of real estate investments		—			21,746
Proceeds from sales of fixed-maturity securities		7,646			12,083
Proceeds from calls, repayments and maturities of fixed-maturity securities		323,568			258,207
Proceeds from sales of equity securities		6,553			6,277
Proceeds from sales, redemptions and maturities of short-term and other investments		—			34
Net cash (used in) provided by investing activities		(179,433	)		59,675
Cash flows from financing activities:
Cash dividends paid		(8,165	)		(6,869	)
Cash dividends paid to redeemable noncontrolling interests		(2,923	)		(3,012	)
Net borrowing under revolving credit facility		48,000			—
Proceeds from issuance of long-term debt		—			12,000
Net surplus contribution from subscribers		864			—
Repayment of long-term debt		(256	)		(328	)
Redemption of long-term debt		(466	)		(6,895	)
Repurchases of common stock		(1,037	)		(784	)
Redemption of redeemable noncontrolling interests		(100,000	)		—
Purchase of noncontrolling interests		(92	)		(237	)
Debt issuance costs		(99	)		(277	)
Net cash used in financing activities		(64,174	)		(6,402	)
Effect of exchange rate changes on cash		(11	)		(2	)
Net (decrease) increase in cash, cash equivalents, and restricted cash		(90,633	)		59,215
Cash, cash equivalents, and restricted cash at beginning of period		539,765			237,763
Cash, cash equivalents, and restricted cash at end of period	$	449,132		$	296,978

(continued)

HCI GROUP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows – (Continued)

(Unaudited)

(Dollar amounts in thousands)


	Six Months Ended
	June 30,
	2024		2023
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	37,818	$	3,958
Cash paid for interest	$	5,680	$	4,370
Non-cash investing and financing activities:
Unrealized gain on investments in available-for-sale securities, net of tax	$	599	$	3,283
Conversion of 4.25% Convertible Senior Notes	$	23,450	$	—
Sale of real estate investments:
Contingent consideration receivable	$	—	$	125
Long-term debt obligations assumed by the buyer	$	—	$	8,995
Receivable from sales of equity securities	$	189	$	488
Receivable from maturities of fixed-maturity securities	$	500	$	—
Payable on purchases of equity securities	$	—	$	757
Payable on purchases of fixed-maturity securities	$	50	$	—

See accompanying Notes to Consolidated Financial Statements (unaudited).

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 1 -- Nature of Operations

HCI Group, Inc., together with its subsidiaries (“HCI” or the “Company”), is primarily engaged in the property and casualty insurance business through two Florida domiciled insurance companies, Homeowners Choice Property & Casualty Insurance Company, Inc. (“HCPCI”) and TypTap Insurance Company (“TypTap”). Both HCPCI and TypTap are authorized to underwrite various homeowners’ property and casualty insurance products and allied lines business in the state of Florida and in other states. The operations of each insurance subsidiary are supported by HCI Group, Inc. and certain HCI subsidiaries. The operations of TypTap are also supported by TypTap Insurance Group, Inc. (“TTIG”), the Company’s majority-owned subsidiary, and certain TTIG subsidiaries. The Company emphasizes the use of internally developed technologies to collect and analyze claims and other supplemental data to assist in the underwriting process and generate savings as well as efficiency for the operations of the insurance subsidiaries and other insurance-related businesses. The Company also provides an attorney-in-fact (“AIF”) service. The Company's subsidiary, Core Risk Managers, LLC (“CRM”), serves as the AIF for Condo Owners Reciprocal Exchange (“CORE”), a reciprocal insurance exchange owned by its policyholders. Although the Company does not have any equity interest in CORE, the Company is required to consolidate CORE as its primary beneficiary. See Note 13 -- “Variable Interest Entity” for additional information. In addition, Greenleaf Capital, LLC, the Company’s real estate subsidiary, is primarily engaged in the business of owning and leasing real estate and operating marina facilities.

Assumed Business

Citizens Assumption

During the second quarter of 2024, the Company continued to participate in a take-out program through which the Company assumed insurance policies held by Citizens Property Insurance Corporation (“Citizens”), a Florida state-supported insurer. During the three and six months ended June 30, 2024, approximately 300 and 10,100 policies, respectively, were assumed by TypTap and CORE. These policies represent approximately $120,100 in annualized premiums written.

Note 2 -- Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements of HCI Group, Inc. and its majority-owned and controlled subsidiaries (collectively, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and the Securities and Exchange Commission (“SEC”) rules for interim financial reporting. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the Company’s financial position as of June 30, 2024 and the results of operations and cash flows for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the results of operations to be expected for any subsequent interim period or for the fiscal year ending December 31, 2024. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2023 included in the Company’s Form 10-K, which was filed with the SEC on March 8, 2024.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

In preparing the interim unaudited consolidated financial statements, management was required to make certain judgments, assumptions, and estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the financial reporting date and throughout the periods being reported upon. Certain of the estimates result from judgments that can be subjective and complex, and consequently actual results may differ from these estimates.

Material estimates that are particularly susceptible to significant change in the near term are related to the Company’s losses and loss adjustment expenses, which include amounts estimated for claims incurred but not yet reported. The Company uses various assumptions and actuarial data it believes to be reasonable under the circumstances to make these estimates. In addition, accounting policies specific to reinsurance with retrospective provisions, reinsurance recoverable, deferred income taxes, limited partnership investments, allowance for credit losses, and stock-based compensation expense involve significant judgments and estimates material to the Company’s consolidated financial statements.

In the case of assumed business, the Company relies entirely on the ceding insurance company to provide information about premiums, losses, and loss adjustment expenses. When the information is not available at the reporting date, the Company will make estimates based on all recent available data. Accordingly, the actual results could differ significantly from those estimates.

All significant intercompany balances and transactions have been eliminated.

Revenue from Claims Processing Services

Revenue related to claims processing services is included in other revenue in the consolidated statements of income. For the three and six months ended June 30, 2024, revenues from claims processing services were $0 in each period. For the three and six months ended June 30, 2023, revenues from claims processing services were $177 and $704, respectively.

Redeemable Noncontrolling Interests

Redeemable noncontrolling interests represent economic interests in TTIG and CORE not held by HCI. They are presented in the temporary equity (mezzanine) section of the consolidated balance sheets.

TTIG

The interest in TTIG contains rights in dividends, voting, conversion, participation, liquidation preference and redemption. The redemption feature is not solely within the control of TTIG. The interest is initially recorded at fair value and is decreased by related issuance costs. The fair value is estimated using a residual fair value approach. The effect of increasing dividend rates is accreted to the redeemable noncontrolling interest with a corresponding reduction in retained income. The effective interest method is used for accretion over the period of the increasing dividend rates. The carrying value of the interest is also subsequently adjusted for accrued dividends and dividend payments. The Company has an option to pay the dividends in cash or make a payment-in-kind. The dividends are accrued monthly assuming they will be settled in cash. When the interest is probable of becoming redeemable, the Company elects to recognize changes in the redemption value immediately as it occurs and adjusts the carrying value of the interest to the maximum redemption value which is the higher of the redemption price or fair market value at the reporting date.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Such changes in the redemption value are treated as dividends when calculating income available to common stockholders.

CORE

The interest in CORE represents a refundable portion of CORE’s subscriber surplus contributions. CORE, a reciprocal insurance exchange, collects surplus contributions in addition to policy premiums from its policyholders referred to as subscribers. The purpose of the surplus contribution is to support CORE’s financial strength and lower CORE’s cost of capital. The surplus contribution made during a policy term may be returned on a pro-rata basis to a subscriber in the event of policy cancellation. As the term of an insurance policy progresses, a portion of the surplus contribution is reclassified from the redeemable noncontrolling interest to the noncontrolling interest.

Noncontrolling Interests

The Company has noncontrolling interests attributable to TTIG and CORE. A noncontrolling interest arises when the Company has less than 100% of the voting rights and economic interests in a subsidiary or a consolidated variable interest entity. The noncontrolling interest in TTIG is periodically adjusted for the expensing of TTIG’s stock-based awards granted to its employees, the interest’s share of TTIG’s net income or loss attributable to common stockholders and the change in other comprehensive income or loss. The noncontrolling interest in CORE is periodically adjusted for the interest’s share of CORE’s net income or loss attributable to common stockholders and the reclassification of surplus contributions from refundable to nonrefundable amount.

Note 3 -- Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Company’s consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows.


	June 30,		December 31,
	2024		2023
Cash and cash equivalents	$	445,829	$	536,478
Restricted cash		3,303		3,287
Total	$	449,132	$	539,765

Restricted cash represents funds in the Company’s sole ownership primarily held by certain states to meet regulatory requirements in which the Company’s insurance subsidiaries conduct business and not available for immediate business use. Funds withheld in an account for which the Company is a co-owner but not the named beneficiary are not considered restricted cash and are included in funds withheld for assumed business on the consolidated balance sheets.

In connection with the sale of the retail shopping center investment property in Melbourne, Florida to a non-affiliate, $87 of restricted cash was deposited in escrow in March 2023 and released in February 2024 as post-sale conditions were met.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 4 -- Investments

a) Available-for-Sale Fixed-Maturity Securities

The Company holds investments in fixed-maturity securities that are classified as available-for-sale. At June 30, 2024 and December 31, 2023, the cost or amortized cost, allowance for credit loss, gross unrealized gains and losses, and estimated fair value of the Company’s available-for-sale securities by security type were as follows:


	Cost or Amortized		Allowance for Credit		Gross Unrealized		Gross Unrealized			Estimated Fair
	Cost		Loss		Gain		Loss			Value
As of June 30, 2024
U.S. Treasury and U.S. government agencies	$	612,692	$	—	$	284	$	(2,999	)	$	609,977
Corporate bonds		30,705		—		35		(948	)		29,792
Exchange-traded debt		495		—		—		(22	)		473
Total	$	643,892	$	—	$	319	$	(3,969	)	$	640,242
As of December 31, 2023
U.S. Treasury and U.S. government agencies	$	359,630	$	—	$	224	$	(3,800	)	$	356,054
Corporate bonds		27,563		—		116		(975	)		26,704
Exchange-traded debt		494		—		—		(14	)		480
Total	$	387,687	$	—	$	340	$	(4,789	)	$	383,238

Expected maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without penalties. The scheduled contractual maturities of fixed-maturity securities as of June 30, 2024 and December 31, 2023 are as follows:


	June 30, 2024				December 31, 2023
	Cost or		Estimated		Cost or		Estimated
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale
Due in one year or less	$	232,194	$	229,497	$	234,992	$	234,025
Due after one year through five years		408,367		407,792		148,935		145,758
Due after five years through ten years		2,837		2,480		3,266		2,974
Due after ten years		494		473		494		481
	$	643,892	$	640,242	$	387,687	$	383,238

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Securities on Deposit

The fair value of fixed-maturity securities on deposit with various regulatory authorities at June 30, 2024 and December 31, 2023 was $1,776 and $1,660, respectively.

Sales of Available-for-Sale Fixed-Maturity Securities

Proceeds received, and the gross realized gains and losses from sales of available-for-sale fixed-maturity securities, for the three and six months ended June 30, 2024 and 2023 were as follows:


			Gross Realized		Gross Realized
	Proceeds		Gains		Losses
Three months ended June 30, 2024	$	1,616	$	1	$	(11	)
Three months ended June 30, 2023	$	1,023	$	—	$	(12	)
Six months ended June 30, 2024	$	7,646	$	13	$	(55	)
Six months ended June 30, 2023	$	12,083	$	—	$	(750	)

Gross Unrealized Losses for Available-for-Sale Fixed-Maturity Securities

Securities with gross unrealized loss positions at June 30, 2024 and December 31, 2023, aggregated by investment category and length of time the individual securities have been in a continuous loss position, are as follows:


	Less Than Twelve Months					Twelve Months or Longer					Total
	Gross			Estimated		Gross			Estimated		Gross			Estimated
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
As of June 30, 2024	Loss			Value		Loss			Value		Loss			Value
U.S. Treasury and U.S. government agencies	$	(351	)	$	279,112	$	(2,648	)	$	131,989	$	(2,999	)	$	411,101
Corporate bonds		(32	)		6,291		(916	)		19,910		(948	)		26,201
Exchange-traded debt		(22	)		473		—			—		(22	)		473
Total available-for-sale securities	$	(405	)	$	285,876	$	(3,564	)	$	151,899	$	(3,969	)	$	437,775


	Less Than Twelve Months					Twelve Months or Longer					Total
	Gross			Estimated		Gross			Estimated		Gross			Estimated
	Unrealized			Fair		Unrealized			Fair		Unrealized			Fair
As of December 31, 2023	Loss			Value		Loss			Value		Loss			Value
U.S. Treasury and U.S. government agencies	$	(22	)	$	3,464	$	(3,778	)	$	181,463	$	(3,800	)	$	184,927
Corporate bonds		(8	)		1,941		(967	)		19,418		(975	)		21,359
Exchange-traded debt		(14	)		481		—			—		(14	)		481
Total available-for-sale securities	$	(44	)	$	5,886	$	(4,745	)	$	200,881	$	(4,789	)	$	206,767

At June 30, 2024 and December 31, 2023, there were 93 and 65 securities, respectively, in an unrealized loss position.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Allowance for Credit Losses of Available-for-Sale Fixed-Maturity Securities

The Company regularly reviews its individual investment securities for credit impairment. The Company considers various factors in determining whether a credit loss exists for each individual security, including-

•

the financial condition and near-term prospects of the issuer, including any specific events that may affect its operations or earnings;

•

the extent to which the market value of the security has been below its cost or amortized cost;

•

general market conditions and industry or sector specific factors and other qualitative factors;

•

nonpayment by the issuer of its contractually obligated interest and principal payments; and

•

the Company’s intent and ability to hold the investment for a period of time sufficient to allow for the recovery of costs.

There was no balance or activity in the allowance for credit losses of available-for-sale fixed-maturity securities during the three and six months ended June 30, 2024 and 2023.

b) Equity Securities

The Company holds investments in equity securities measured at fair values which are readily determinable. At June 30, 2024 and December 31, 2023, the cost, gross unrealized gains and losses, and estimated fair value of the Company’s equity securities were as follows:


			Gross Unrealized		Gross Unrealized			Estimated Fair
	Cost		Gain		Loss			Value
June 30, 2024	$	49,192	$	6,708	$	(2,014	)	$	53,886
December 31, 2023	$	44,011	$	3,945	$	(2,419	)	$	45,537

The table below presents the portion of unrealized gains and losses in the Company’s consolidated statements of income related to equity securities still held.


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2024		2023			2024		2023
Net gains recognized	$	755	$	730		$	3,422	$	844
Exclude: Net realized gains (losses) recognized for securities sold		222		(167	)		254		(582	)
Net unrealized gains recognized	$	533	$	897		$	3,168	$	1,426

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Sales of Equity Securities

Proceeds received, and the gross realized gains and losses from sales of equity securities, for the three and six months ended June 30, 2024 and 2023 were as follows:


			Gross Realized		Gross Realized
	Proceeds		Gains		Losses
Three months ended June 30, 2024	$	3,037	$	389	$	(167	)
Three months ended June 30, 2023	$	2,523	$	85	$	(252	)
Six months ended June 30, 2024	$	6,553	$	562	$	(308	)
Six months ended June 30, 2023	$	6,277	$	102	$	(684	)

c) Limited Partnership Investments

The Company has interests in limited partnerships that are not registered or readily tradeable on a securities exchange. These partnerships are private equity funds managed by general partners who make decisions with regard to financial policies and operations. As such, the Company is not the primary beneficiary and does not consolidate these partnerships. The following table provides information related to the Company’s investments in limited partnerships:


	June 30, 2024						December 31, 2023
	Carrying		Unfunded				Carrying		Unfunded
Investment Strategy	Value		Balance		(%) (a)		Value		Balance		(%) (a)
Primarily in senior secured loans and, to a limited extent, in other debt and equity securities of private U.S. lower-middle-market companies. (b)(c)(e)	$	2,742	$	—		15.37	$	3,295	$	—		15.37
Value creation through active distressed debt investing primarily in bank loans, public and private corporate bonds, asset-backed securities, and equity securities received in connection with debt restructuring. (b)(d)(e)		1,866		—		1.26		2,271		—		1.25
High returns and long-term capital appreciation through investments in the power, utility and energy industries, and in the infrastructure sector. (b)(f)(g)		3,064		—		0.17		3,400		—		0.18
Value-oriented investments in less liquid and mispriced senior and junior debts of private equity-backed companies. (b)(h)(i)		2,578		—		0.55		3,306		—		0.55
Value-oriented investments in mature real estate private equity funds and portfolios globally. (b)(j)		6,797		2,543		1.32		7,590		2,543		1.32
Risk-adjusted returns on credit and equity investments, primarily in private equity-owned companies. (b)(k)		4,809		810		0.55		3,721		1,662		0.55
Total	$	21,856	$	3,353			$	23,583	$	4,205

(a)

Represents the Company’s percentage investment in the fund at each balance sheet date.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

(b)

Except under certain circumstances, withdrawals from the funds or any assignments are not permitted. Distributions, except income from late admission of a new limited partner, will be received when underlying investments of the funds are liquidated.

(c)

The term is expected to be two years following the maturity of the fund’s outstanding leverage. Although the capital commitment period has expired, follow-on investments and pending commitments may require additional fundings.

(d)

Effective July 1, 2023, this investment is in the process of winding down. Although the capital commitment period has ended, the general partner could still request an additional funding under certain circumstances.

(e)

At the fund manager’s discretion, the term of the fund may be extended for up to two additional one-year periods.

(f)

Expected to have a ten-year term. The capital commitment period has expired but the general partner may request additional funding for follow-on investment.

(g)

With the consent of a supermajority of partners, the term of the fund may be extended for up to three additional one-year periods.

(h)

Expected to have an eight-year term from the commencement date, which can be extended for up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.

(i)

The capital commitment period has ended but an additional funding may be requested.

(j)

The term is expected to end November 27, 2027. The term may be extended for up to four additional one-year periods at the general partner’s discretion, and up to two additional one-year periods with the consent of the advisory committee.

(k)

Expected to have an eight-year term after the final admission date. The term may be extended for an additional one-year period at the general partner’s discretion, and up to two additional one-year periods with the consent of either the advisory committee or a majority of limited partners.

The following is the summary of aggregated unaudited financial information of limited partnerships included in the investment strategy table above, which in certain cases is presented on a three-month lag due to the unavailability of information at the Company’s respective balance sheet dates. The financial statements of these limited partnerships are audited annually.


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Operating results:
Total income	$	16,173		$	(144,193	)	$	19,239		$	38,167
Total expenses		(17,675	)		(24,840	)		(43,276	)		(27,097	)
Net (loss) income	$	(1,502	)	$	(169,033	)	$	(24,037	)	$	11,070


	June 30,		December 31,
	2024		2023
Balance sheet:
Total assets	$	4,101,810	$	4,072,501
Total liabilities	$	202,337	$	220,525

For the three and six months ended June 30, 2024, the Company recognized net investment loss of $110 and net investment income of $85, respectively. During the three and six months ended June 30, 2024, the Company received total cash distributions of $2,756 and $2,918, respectively, including returns on investment of $626.

For the three months ended June 30, 2023, the Company recognized net investment loss of $11. For the six months ended June 30, 2023, the Company recognized net investment income of $542. During the three and six months ended June 30, 2023, the Company received total cash distributions of $1,112 and $3,017, respectively, including returns on investment of $118 and $421, respectively.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

At June 30, 2024 and December 31, 2023, the Company’s net cumulative contributed capital to the partnerships at each respective balance sheet date totaled $22,160 and $23,346, respectively, and the Company’s maximum exposure to loss aggregated $21,856 and $23,583, respectively.

d) Real Estate Investments

Real estate investments consist of the following as of June 30, 2024 and December 31, 2023:


	June 30,			December 31,
	2024			2023
Land	$	42,272		$	42,272
Land improvements		4,842			4,387
Buildings and building improvements		18,593			18,594
Tenant and leasehold improvements		2,265			1,869
Other		12,480			7,168
Total, at cost		80,452			74,290
Less: accumulated depreciation and amortization		(6,945	)		(6,397	)
Real estate investments	$	73,507		$	67,893

Depreciation and amortization expense related to real estate investments was $279 and $228 for the three months ended June 30, 2024 and 2023, respectively, and $548 and $681 for the six months ended June 30, 2024 and 2023, respectively.

e) Net Investment Income

Net investment income (loss), by source, is summarized as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Available-for-sale fixed-maturity securities	$	6,020		$	5,120		$	10,848		$	9,155
Equity securities		511			378			952			674
Investment expense		(141	)		(125	)		(220	)		(254	)
Limited partnership investments		(110	)		(11	)		85			542
Real estate investments		3,783			270			5,276			9,563
Cash and cash equivalents		6,818			3,162			14,007			6,829
Net investment income	$	16,881		$	8,794		$	30,948		$	26,509

In connection with the purchase of commercial real estate in Tampa, Florida in December 2023, the Company leased the property back to the seller for a lease term expiring on December 31, 2024. The lease was considered to be at a below market rate. The value of the below market lease was recognized as deferred rent and amortized to rental income over the lease term. In June 2024, the tenant occupying the property under a sublease agreement with the seller vacated the property. As a result, the Company derecognized the remaining deferred rent to rental income. For the three and six months ended June 30, 2024, income from real estate investments included rental income of $2,497 resulting from such derecognition of deferred rent.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

For the six months ended June 30, 2023, income from real estate investments included a net realized gain of $6,476 resulting from the sale of the retail shopping center investment property in Melbourne, Florida in March 2023 for a price of $18,500, and also included a net realized gain of $2,460 resulting from the sale of retail shopping center investment property in Sorrento, Florida in March 2023 for a price of $13,418.

f) Other Investments

From time to time, the Company may invest in financial assets other than stocks, mutual funds, and bonds. For the three and six months ended June 30, 2024, net realized gains related to other investments were $0 in each period. For the three and six months ended June 30, 2023, net realized losses were $51 and $47, respectively.

Note 5 -- Comprehensive Income (Loss)

Comprehensive income (loss) includes net income and other comprehensive income or loss, which for the Company includes changes in unrealized gains or losses of available-for-sale fixed-maturity securities carried at fair value and changes to any credit losses related to these investments. Reclassification adjustments for realized (gains) losses are reflected in net realized investment gains (losses) on the consolidated statements of income. The components of other comprehensive income or loss and the related tax effects allocated to each component were as follows:


	Three Months Ended						Three Months Ended
	June 30, 2024						June 30, 2023
	Before		Income		Net of		Before			Income			Net of
	Tax		Tax Effect		Tax		Tax			Tax Effect			Tax
Net unrealized gains (losses)	$	705	$	177	$	528	$	(2,263	)	$	(574	)	$	(1,689	)
Reclassification adjustment for net realized losses		10		2		8		12			3			9
Total other comprehensive income (loss)	$	715	$	179	$	536	$	(2,251	)	$	(571	)	$	(1,680	)


	Six Months Ended						Six Months Ended
	June 30, 2024						June 30, 2023
	Before		Income		Net of		Before		Income			Net of
	Tax		Tax Effect		Tax		Tax		Tax Effect			Tax
Net unrealized gains	$	757	$	190	$	567	$	152	$	(2,571	)	$	2,723
Reclassification adjustment for net realized losses		42		10		32		750		190			560
Total other comprehensive income	$	799	$	200	$	599	$	902	$	(2,381	)	$	3,283

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 6 -- Fair Value Measurements

The Company records and discloses certain financial assets at their estimated fair values. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:


Level 1	–	Unadjusted quoted prices in active markets for identical assets.
Level 2	–	Other inputs that are observable for the asset, either directly or indirectly such as quoted prices for identical assets that are not observable throughout the full term of the asset.
Level 3	–	Inputs that are unobservable.

Valuation Methodology

Cash and Cash Equivalents

Cash and cash equivalents primarily consist of money-market funds and certificates of deposit maturing within 90 days. Their carrying value approximates fair value due to the short maturity and high liquidity of these funds.

Restricted Cash

Restricted cash represents cash held by state authorities and the carrying value approximates fair value.

Fixed-Maturity and Equity Securities

Estimated fair values of the Company’s fixed-maturity and equity securities are determined in accordance with U.S. GAAP, using valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair values are generally measured using quoted prices in active markets for identical securities or other inputs that are observable either directly or indirectly, such as quoted prices for similar securities. In those instances where observable inputs are not available, fair values are measured using unobservable inputs. Unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the security and are developed based on the best information available in the circumstances. Fair value estimates derived from unobservable inputs are significantly affected by the assumptions used, including the discount rates and the estimated amounts and timing of future cash flows. The derived fair value estimates cannot be substantiated by comparison to independent markets and are not necessarily indicative of the amounts that would be realized in a current market exchange.

The estimated fair values for securities that do not trade on a daily basis are determined by management, utilizing prices obtained from an independent pricing service and information provided by brokers, which are level 2 inputs. Management reviews the assumptions and methods utilized by the pricing service and then compares the relevant data and pricing to broker-provided data. The Company gains assurance of the overall reasonableness and consistent application of the assumptions and methodologies, and compliance with accounting standards for fair value determination through ongoing monitoring of the reported fair values.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Revolving Credit Facility

From time to time, the Company has an amount outstanding under a revolving credit facility. The interest rate is variable and is periodically adjusted based on the Secured Overnight Financing Rate (“SOFR”) plus a ten basis points adjustment plus a margin based on the debt-to-capital ratio. As a result, carrying value, when outstanding, approximates fair value.

Long-Term Debt

The following table summarizes components of the Company’s long-term debt and methods used in estimating their fair values:


	Maturity Date	Valuation Methodology
4.75% Convertible Senior Notes	2042	Quoted price
4.25% Convertible Senior Notes	*	Quoted price
4.55% Promissory Note	2036	Discounted cash flow method/Level 3 inputs
5.50% Promissory Note	2033	Discounted cash flow method/Level 3 inputs


*	Debt derecognized in March 2024. See Note 10 -- “Long-Term Debt” for additional information.

Assets Measured at Estimated Fair Value on a Recurring Basis

The following tables present information about the Company’s financial assets measured at estimated fair value on a recurring basis. The tables indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of June 30, 2024 and December 31, 2023:


	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
As of June 30, 2024
Financial Assets:
Cash and cash equivalents	$	445,829	$	—	$	—	$	445,829
Restricted cash	$	3,303	$	—	$	—	$	3,303
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies	$	602,042	$	7,935	$	—	$	609,977
Corporate bonds		23,339		6,453		—		29,792
Exchange-traded debt		473		—		—		473
Total available-for-sale securities	$	625,854	$	14,388	$	—	$	640,242
Equity securities	$	53,886	$	—	$	—	$	53,886

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)


	Fair Value Measurements Using
	(Level 1)		(Level 2)		(Level 3)		Total
As of December 31, 2023
Financial Assets:
Cash and cash equivalents	$	536,478	$	—	$	—	$	536,478
Restricted cash	$	3,287	$	—	$	—	$	3,287
Fixed-maturity securities:
U.S. Treasury and U.S. government agencies	$	348,145	$	7,909	$	—	$	356,054
Corporate bonds		20,267		6,437		—		26,704
Exchange-traded debt		480		—		—		480
Total available-for-sale securities	$	368,892	$	14,346	$	—	$	383,238
Equity securities	$	45,537	$	—	$	—	$	45,537

Liabilities Carried at Other Than Fair Value

The following tables present fair value information for financial liabilities that are carried on the consolidated balance sheets at amounts other than fair value as of June 30, 2024 and December 31, 2023:


	Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
As of June 30, 2024
Financial Liabilities:
Revolving credit facility	$	48,000	$	—	$	48,000	$	—	$	48,000
Long-term debt:
4.75% Convertible Senior Notes	$	168,806	$	—	$	224,909	$	—	$	224,909
5.50% Promissory Note		11,600		—		—		11,290		11,290
4.55% Promissory Note		4,504		—		—		4,180		4,180
Total long-term debt	$	184,910	$	—	$	224,909	$	15,470	$	240,379


	Carrying		Fair Value Measurements Using						Estimated
	Value		(Level 1)		(Level 2)		(Level 3)		Fair Value
As of December 31, 2023
Financial Liabilities:
Long-term debt:
4.75% Convertible Senior Notes	$	168,230	$	—	$	215,114	$	—	$	215,114
4.25% Convertible Senior Notes		23,916		—		34,545		—		34,545
5.50% Promissory Note		11,707		—		—		11,512		11,512
4.55% Promissory Note		4,640		—		—		4,349		4,349
Total long-term debt	$	208,493	$	—	$	249,659	$	15,861	$	265,520

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 7 -- Intangible Assets, Net

The Company’s intangible assets, net consist of the following:


	June 30,			December 31,
	2024			2023
In-place leases (a)		2,220			2,221
Policy renewal rights - United		10,100			10,100
Non-compete agreements - United (b)		314			314
Total, at cost		12,634			12,635
Less: accumulated amortization		(6,202	)		(4,976	)
Intangible assets, net	$	6,432		$	7,659

(a)

Amortization related to the Haines City property is expected to start in November 2024.

(b)

Fully amortized.

The remaining weighted-average amortization periods for the intangible assets as of June 30, 2024 are summarized in the table below:


In-place leases		18.2 years
Policy renewal rights - United		1.8 years

At June 30, 2024 and December 31, 2023, contingent liabilities related to renewal rights intangible assets were $371 and are included in other liabilities on the consolidated balance sheets.

Note 8 -- Other Assets

The following table summarizes the Company’s other assets:


	June 30,		December 31,
	2024		2023
Benefits receivable related to retrospective reinsurance contract	$	58,275	$	44,289
Reimbursement and fees receivable under TPA services		—		629
Prepaid expenses		4,296		2,882
Deposits		401		409
Lease acquisition costs, net		849		833
Other		1,663		1,323
Total other assets	$	65,484	$	50,365

During the three and six months ended June 30, 2024, the Company recognized credit loss expense of $351 related to the reimbursement and fees receivable under TPA services.

Note 9 -- Revolving Credit Facility

At June 30, 2024, the Company had $48,000 outstanding under the credit facility, which was used to partially fund the redemption of the TTIG Series A Preferred Stock held by Centerbridge Partners, L.P. (“Centerbridge”) on January 22, 2024. See Note 18 -- “Redeemable Noncontrolling Interest” for additional information. For the three months ended June 30, 2024 and 2023, interest expense was $892 and $23, respectively, including $15 and $22 of amortization of issuance costs, respectively. For the six months ended June 30, 2024 and 2023, interest expense was $1,630 and $48, respectively, including $30 and $47 of amortization of issuance costs, respectively.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

At June 30, 2024, the Company was in compliance with all required covenants and had available borrowing capacity of $27,000.

Note 10 -- Long-Term Debt

The following table summarizes the Company’s long-term debt:


	June 30,			December 31,
	2024			2023
4.75% Convertible Senior Notes, due June 1, 2042	$	172,500		$	172,500
4.25% Convertible Senior Notes, due March 1, 2037 (a)		—			23,916
4.55% Promissory Note, due through August 1, 2036		4,561			4,700
5.50% Promissory Note, due through July 1, 2033		11,790			11,906
Finance lease liabilities, due through October 15, 2024		1			2
Total principal amount		188,852			213,024
Less: unamortized issuance costs		(3,940	)		(4,529	)
Total long-term debt	$	184,912		$	208,495

(a)

Notes converted or redeemed during the first quarter of 2024

The following table summarizes future maturities of long-term debt as of June 30, 2024, which takes into consideration the assumption that the 4.75% Convertible Senior Notes are repurchased at their next earliest call date:


Due in 12 months following June 30,
2024	$	530
2025		556
2026		585
2027		173,114
2028		646
Thereafter		13,421
Total	$	188,852

Information with respect to interest expense related to long-term debt is as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Interest Expense:
Contractual interest	$	2,264	$	2,367	$	4,382	$	4,864
Non-cash expense (b)		296		277		589		556
Total	$	2,560	$	2,644	$	4,971	$	5,420

(b)

Includes amortization of debt issuance costs.

4.25% Convertible Senior Notes

During the first quarter of 2024, the Company notified the holders of its outstanding 4.25% Convertible Senior Notes due 2037 that the Company had elected to redeem the remaining $23,916 principal balance of the 4.25% Convertible Senior Notes. As a result of this notice, the 4.25% Convertible Senior Notes became immediately convertible into the Company’s common shares, with a redemption date of March 15, 2024.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The conversion rate of the Company’s 4.25% Convertible Senior Notes was 16.5892 shares of common stock for each $1 in principal amount, which was the equivalent of approximately $60.25 per share. The Company converted $23,450 in aggregate principal of 4.25% Convertible Senior Notes for aggregate consideration of 389,087 shares of HCI’s common stock plus $1 cash consideration in lieu of fractional shares. The remaining 4.25% Convertible Senior Notes were redeemed for $466 on March 15, 2024.

4.75% Convertible Senior Notes

The conversion rate of the 4.75% Convertible Senior Notes is currently 12.4166 shares of common stock for each $1 in principal amount, which is the equivalent of approximately $80.54 per share.

The effective interest rate for the 4.75% Convertible Senior Notes, taking into account both cash and non-cash components, approximates 5.6%. Had a 20-year term been used for the amortization of the issuance costs of the 4.75% Convertible Senior Notes, the annual effective interest rate charged to earnings would have decreased to approximately 5.0%. As of June 30, 2024, the remaining amortization period of the debt issuance costs was expected to be 2.92 years.

Note 11 -- Reinsurance

Reinsurance obtained from other insurance companies

The Company cedes a portion of its homeowners’ insurance exposure to other entities under catastrophe excess of loss reinsurance contracts and a portion of its flood insurance exposure under one quota share reinsurance agreement. Ceded premiums under most catastrophe excess of loss reinsurance contracts are subject to revision resulting from subsequent adjustments in total insured value. Under the terms of the quota share reinsurance agreement, the Company is entitled to a 30% ceding commission on ceded premiums written and a profit commission equal to 10% of net profit.

The Company remains liable for claims payments in the event that any reinsurer is unable to meet its obligations under the reinsurance agreements. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The Company contracts with a number of reinsurers to secure its annual reinsurance coverage, which generally becomes effective June 1st of each year. The Company purchases reinsurance each year taking into consideration probable maximum losses and reinsurance market conditions.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The impact of the reinsurance contracts on premiums written and earned is as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Premiums Written:
Direct	$	284,289		$	179,983		$	496,184		$	387,406
Assumed		22,613			—			65,704			(7,569	)
Gross written		306,902			179,983			561,888			379,837
Ceded		(76,713	)		(66,390	)		(144,819	)		(136,899	)
Net premiums written	$	230,189		$	113,593		$	417,069		$	242,938
Premiums Earned:
Direct	$	201,791		$	181,946		$	391,466		$	354,851
Assumed		61,770			—			128,739			7,163
Gross earned		263,561			181,946			520,205			362,014
Ceded		(76,713	)		(66,390	)		(144,819	)		(136,899	)
Net premiums earned	$	186,848		$	115,556		$	375,386		$	225,115

During the three and six months ended June 30, 2024, the Company recognized ceded losses of $2,672 in each period as reductions in losses and loss adjustment expenses. During the three and six months ended June 30, 2023, the Company recognized ceded losses of $1,109 and $3,860, respectively, as reductions in losses and loss adjustment expenses. At June 30, 2024 and December 31, 2023, there were 44 and 33 reinsurers, respectively, participating in the Company’s reinsurance program. Total net amounts recoverable and receivable from reinsurers at June 30, 2024 and December 31, 2023 were $303,162 and $350,294, respectively. Approximately 71.4% of the reinsurance recoverable balance at June 30, 2024 was receivable from six reinsurers. Based on all available information considered in the rating-based method, the Company recognized decreases in credit loss expense of $3 and $52 for the three and six months ended June 30, 2024, respectively. For the three and six months ended June 30, 2023, the Company recognized decreases in credit loss expense of $101 and $102, respectively. Allowances for credit losses related to the reinsurance recoverable balance were $66 and $118 at June 30, 2024 and December 31, 2023, respectively.

One of the existing reinsurance contracts includes retrospective provisions that adjust premiums in the event losses are minimal or zero. For the three and six months ended June 30, 2024, the Company recognized reductions in premiums ceded of $6,993 and $13,986, respectively, related to these adjustments in the consolidated statements of income. For the three and six months ended June 30, 2023, the Company recognized reductions in premiums ceded of $6,993 and $13,986, respectively. See Note 21 -- “Commitments and Contingencies” for additional information.

Amounts receivable pursuant to retrospective provisions are reflected in other assets. At June 30, 2024 and December 31, 2023, other assets included $58,275 and $44,289, respectively, of amounts receivable pursuant to retrospective provisions. Management believes the credit risk associated with the collectability of these accrued benefits is minimal as the amount receivable is concentrated with one reinsurer with a good credit rating and the Company monitors the creditworthiness of this reinsurer based on available information about the reinsurer’s financial condition.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Reinsurance provided to other insurance companies

United

From 2021 to 2022, the Company, through HCPCI and TypTap, provided quota share reinsurance on all in-force, new and renewal policies issued by United Property & Casualty Insurance Company, an insurance subsidiary of United Insurance Holdings Corporation (“United”), in the states of Connecticut, New Jersey, Massachusetts, and Rhode Island (collectively “Northeast Region”). From 2022 to 2023, the Company’s insurance subsidiaries also provided quota share reinsurance on all of United’s personal lines insurance business in the states of Georgia, North Carolina, and South Carolina (collectively “Southeast Region”). In conjunction with these reinsurance agreements, the Company entered into renewal rights agreements with United which provided the Company with the right to renew and/or replace United’s insurance policies at the end of their respective policy periods. In February 2023, United’s Florida-domiciled residential insurance subsidiary was placed into receivership by the State of Florida due to its financial insolvency and, as a result, the Company ceased providing quota share reinsurance on United policies. The majority of the policies under these reinsurance agreements have been renewed and/or replaced by the Company.

At June 30, 2024 and December 31, 2023, the Company had a net balance of $582 due to United related to the Northeast Region, representing ceding commission payable.

For the three and six months ended June 30, 2023, $0 and $7,569, respectively, of assumed premiums written related to the Southeast Region’s insurance policies were derecognized, which primarily resulted from the return of the unearned portion of assumed written premiums subsequent to the Company’s renewal and/or replacement of insurance policies in the Southeast Region. At June 30, 2024, the Company had a net balance of $1,438 due to United related to the Southeast Region, consisting of premiums payable of $1,712 offset by ceding commission receivable of $274. At December 31, 2023, the Company had a net balance of $4,203 due to United related to the Southeast Region, consisting of premiums payable of $1,712 and payable on paid losses and loss adjustment expenses of $2,765, offset by ceding commission receivable of $274.

At June 30, 2024, the Company had a net amount due to United of $2,020 and funds withheld for assumed business in trust accounts totaling $14,353 for the benefit of policies assumed from United. The Company ceased providing TPA services to United in March 2023. The Company cannot predict the actions a receiver might take, which may include restrictions on, or use of, funds held in trust. Any such actions could have a material adverse effect on the Company’s financial position and results of operations.

At June 30, 2024 and December 31, 2023, the balance of funds withheld for assumed business related to the Company’s quota share reinsurance agreements with United was $14,353 and $30,087, respectively.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Citizens Assumption

Assumed premiums written related to Citizens policies were $22,613 and $65,704 for the three and six months ended June 30, 2024, respectively, in comparison with $0 for the three and six months ended June 30, 2023.

Note 12 -- Losses and Loss Adjustment Expenses

The liability for losses and loss adjustment expenses (“LAE”) is determined on an individual case basis for all claims reported. The liability also includes amounts for unallocated expenses, anticipated future claims development and losses incurred but not reported.

The Company primarily writes insurance in states which could be exposed to hurricanes or other natural catastrophes. The occurrence of a major catastrophe could have a significant effect on the Company’s quarterly results and cause a temporary disruption of the normal operations of the Company. However, the Company is unable to predict the frequency or severity of any such events that may occur in the near term or thereafter.

Activity in the liability for losses and LAE is summarized as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Net balance, beginning of period*	$	273,425		$	246,051		$	254,351		$	246,546
Incurred, net of reinsurance, related to:
Current period		73,506			60,968			153,428			117,666
Prior periods		4,818			922			4,818			4,789
Total incurred, net of reinsurance		78,324			61,890			158,246			122,455
Paid, net of reinsurance, related to:
Current period		(31,771	)		(27,105	)		(49,560	)		(38,215	)
Prior periods		(28,193	)		(37,250	)		(71,252	)		(87,200	)
Total paid, net of reinsurance		(59,964	)		(64,355	)		(120,812	)		(125,415	)
Net balance, end of period		291,785			243,586			291,785			243,586
Add: reinsurance recoverable before allowance for credit losses		279,861			505,369			279,861			505,369
Gross balance, end of period	$	571,646		$	748,955		$	571,646		$	748,955

* Net balance represents beginning-of-period liability for unpaid losses and LAE less beginning-of-period reinsurance recoverable for unpaid losses and LAE.

The establishment of loss and LAE reserves is an inherently uncertain process and changes in loss and LAE reserve estimates are expected as these estimates are subject to the outcome of future events. Changes in estimates, or differences between estimates and amounts ultimately paid, are reflected in the operating results of the period during which such estimates are adjusted. During the three and six months ended June 30, 2024, the Company recognized losses related to prior periods of $4,818 in each period, primarily to increase reserves in response to litigation. Losses and LAE for the three and six months ended June 30, 2024 included net estimated losses of approximately $16,782 and $38,460, respectively, related to Citizens policies assumed. Excluding Citizens-related losses, lower losses and LAE for the three and six months ended June 30, 2024 primarily resulted from a decrease in claims and litigation related to Florida policies.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 13 -- Variable Interest Entity

CORE, a Florida-domiciled reciprocal insurance exchange, is owned by its policyholders, referred to as subscribers, and was organized to offer commercial residential multiple peril and wind insurance products. Each subscriber owns part of CORE by buying an insurance policy and making a surplus contribution. CORE is managed by CRM, an AIF company which is a wholly-owned subsidiary of HCI. At the formation date of CORE, management determined that CORE is a variable interest entity (“VIE”).

HCI is required to assess whether it has a controlling financial interest in CORE. A controlling financial interest exists if an entity has both: 1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and 2) the obligation to absorb losses from or the right to receive benefits of the VIE that could potentially be significant to the VIE. Under U.S. GAAP, an entity meeting these requirements is considered to be the primary beneficiary of a VIE and is required to consolidate the VIE. Since in the judgment of management, HCI meets these requirements via the management and service agreements and the subordinated surplus note, HCI is required to consolidate CORE.

Further, as HCI has no equity at risk, CORE’s equity and results of operations are included in noncontrolling interests. In the event of dissolution, subscribers will participate in the distribution of any remaining equity without being liable for any shortfall in CORE's equity.

CORE’s assets are legally restricted for the purpose of fulfilling obligations specific to CORE. The creditors of CORE have no legal right to pursue additional sources of payment from the Company. The following table summarizes the assets and liabilities related to CORE, a consolidated VIE, which are included in the accompanying consolidated balance sheets:


	June 30,		December 31,
	2024		2023
Assets:
Cash and cash equivalents	$	48,109	$	24,635
Restricted cash		302		300
Income taxes receivable		2,820		—
Premiums receivable		3,792		—
Assumed premiums receivable		11,014		—
Prepaid reinsurance premium		6,512		—
Deferred policy acquisition costs		1,426		—
Other assets		504		65
Total assets	$	74,479	$	25,000
Liabilities:
Losses and loss adjustment expenses	$	1,111	$	—
Unearned premiums		39,093		—
Advance premiums		265		—
Ceded reinsurance premiums payable		796		—
Accrued expenses		1,128		—
Deferred income taxes, net		1,440		—
Other liabilities		165		—
Total liabilities	$	43,998	$	—

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 14 -- Segment Information

The Company identifies its operating divisions based on managerial emphasis, organizational structure and revenue source. The Company has five reportable segments: HCPCI insurance operations, TypTap Group, reciprocal exchange operations, real estate operations, and corporate and other. Due to their economic characteristics, the Company’s property and casualty insurance division and reinsurance operations, excluding the insurance operations under TypTap Group and reciprocal exchange operations, are grouped together into one reportable segment under HCPCI insurance operations. The TypTap Group segment includes its property and casualty insurance operations, information technology operations and its management company’s activities. The reciprocal exchange segment represents the insurance operations of CORE, a consolidated VIE. The real estate operations segment includes companies engaged in operating commercial properties the Company owns for investment purposes or for use in its own operations. The corporate and other segment represents the activities of the holding companies and any other companies, such as CRM, that do not meet the quantitative and qualitative thresholds for a reportable segment. The determination of segments may change over time due to changes in operational emphasis, revenues, and results of operations. The Company’s chief executive officer, who serves as the Company’s chief operating decision maker, evaluates each division’s financial and operating performance based on revenue and operating income.

For the three months ended June 30, 2024 and 2023, revenues from the HCPCI insurance operations segment before intracompany elimination represented 57.3% and 65.1%, respectively, and revenues from the TypTap Group segment represented 37.2% and 33.4%, respectively, of total revenues of all operating segments. For the six months ended June 30, 2024 and 2023, revenues from the HCPCI insurance operations segment before intracompany elimination represented 60.2% and 63.3%, respectively, and revenues from the TypTap Group segment represented 35.7% and 34.9%, respectively, of total revenues of all operating segments. At June 30, 2024 and December 31, 2023, HCPCI insurance operations’ total assets represented 54.9% and 55.3%, respectively, and TypTap Group’s total assets represented 32.0% and 33.6%, respectively, of the combined assets of all operating segments.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The following tables present segment information reconciled to the Company’s consolidated statements of income. Intersegment transactions are not eliminated from segment results. However, intracompany transactions are eliminated in segment results below.


For Three Months Ended June 30, 2024	HCPCI Insurance Operations			TypTap Group			Reciprocal Exchange Operations			Real Estate (a)		Corporate/ Other (b)			Reclassification/ Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	150,357		$	107,055		$	12,804		$	—	$	—		$	(6,655	)	$	263,561
Premiums ceded		(46,828	)		(30,271	)		(6,269	)		—		—			6,655			(76,713	)
Net premiums earned		103,529			76,784			6,535			—		—			—			186,848
Net income from investment portfolio		7,087			5,008			139			—		3,975			1,417			17,626
Policy fee income		571			518			—			—		—			—			1,089
Other		3,689			3,556			9			5,834		3,611			(16,017	)		682
Total revenue		114,876			85,866			6,683			5,834		7,586			(14,600	)		206,245
Expenses:
Losses and loss adjustment expenses		37,856			38,790			1,605			—		—			73			78,324
Amortization of deferred policy acquisition costs		11,017			10,846			88			—		—			—			21,951
Other policy acquisition expenses		609			514			1,805			—		—			(1,427	)		1,501
Stock-based compensation expense		319			656			—			—		1,401			—			2,376
Interest expense		—			1,806			559			221		3,231			(2,365	)		3,452
Depreciation and amortization		139			1,130			—			418		162			(285	)		1,564
Personnel and other operating expenses		14,457			10,210			52			1,629		4,140			(9,437	)		21,051
Total expenses		64,397			63,952			4,109			2,268		8,934			(13,441	)		130,219
Income (loss) before income taxes (d)	$	50,479		$	21,914		$	2,574		$	3,566	$	(1,348	)	$	(1,159	)	$	76,026
Total revenue from non-affiliates (e)	$	105,143		$	89,947		$	7,895		$	4,992	$	2,265
Gross premiums written	$	191,774		$	79,093		$	36,035

(a)

Other revenue under real estate primarily consisted of rental income from investment properties.

(b)

Other revenue under corporate and other primarily consisted of revenue from marina operations and management fees for attorney-in-fact services.

(c)

Gross premiums earned under HCPCI Insurance Operations consist of $143,702 from HCPCI and $6,655 from a reinsurance company.

(d)

The income (loss) before income taxes in the reclassification/elimination column is attributable to intercompany transactions between the reciprocal exchange operations and the AIF operations. The reciprocal exchange operations record service fee expenses based on earned premiums or other appropriate measures, while the AIF operations recognize service fee revenues according to U.S. GAAP revenue recognition standards. Although both service fee expenses and revenues are fully eliminated on consolidation, they do not completely offset each other in this presentation due to the different methods of recognition.

(e)

Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)


For Three Months Ended June 30, 2023	HCPCI Insurance Operations			TypTap Group			Real Estate (a)		Corporate/ Other (b)			Reclassification/ Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	101,790		$	85,071		$	—	$	—		$	(4,915	)	$	181,946
Premiums ceded		(40,453	)		(30,848	)		—		—			4,911			(66,390	)
Net premiums earned		61,337			54,223			—		—			(4	)		115,556
Net income from investment portfolio		4,393			3,602			—		1,627			(161	)		9,461
Policy fee income		551			918			—		—			—			1,469
Other		3,717			1,190			2,132		677			(6,875	)		841
Total revenue		69,998			59,933			2,132		2,304			(7,040	)		127,327
Expenses:
Losses and loss adjustment expenses		27,653			34,937			—		—			(700	)		61,890
Amortization of deferred policy acquisition costs		10,000			11,422			—		—			—			21,422
Other policy acquisition expenses		617			597			—		—			(18	)		1,196
Stock-based compensation expense		498			658			—		711			—			1,867
Interest expense		—			430			67		2,600			(430	)		2,667
Depreciation and amortization		141			1,030			326		204			(236	)		1,465
Personnel and other operating expenses		8,916			9,938			1,501		1,855			(5,656	)		16,554
Total expenses		47,825			59,012			1,894		5,370			(7,040	)		107,061
Income (loss) before income taxes	$	22,173		$	921		$	238	$	(3,066	)	$	—		$	20,266
Total revenue from non-affiliates (d)	$	62,240		$	67,411		$	1,325	$	1,735
Gross premiums written	$	140,545		$	39,438

(a)

Other revenue under real estate primarily consisted of rental income from investment properties.

(b)

Other revenue under corporate and other primarily consisted of revenue from marina operations.

(c)

Gross premiums earned under HCPCI Insurance Operations consist of $96,875 from HCPCI and $4,915 from a reinsurance company.

(d)

Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)


For Six Months Ended June 30, 2024	HCPCI Insurance Operations			TypTap Group			Reciprocal Exchange Operations			Real Estate (a)		Corporate/ Other (b)			Reclassification/ Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	305,739		$	210,803		$	16,429		$	—	$	—		$	(12,766	)	$	520,205
Premiums ceded		(90,154	)		(58,944	)		(8,487	)		—		—			12,766			(144,819	)
Net premiums earned		215,585			151,859			7,942			—		—			—			375,386
Net income from investment portfolio		15,315			9,551			195			—		8,669			598			34,328
Policy fee income		1,075			1,033			—			—		—			—			2,108
Other		7,227			5,051			9			9,281		4,641			(25,172	)		1,037
Total revenue		239,202			167,494			8,146			9,281		13,310			(24,574	)		412,859
Expenses:
Losses and loss adjustment expenses		76,870			79,343			2,873			—		—			(840	)		158,246
Amortization of deferred policy acquisition costs		21,153			21,641			88			—		—			—			42,882
Other policy acquisition expenses		1,188			1,033			2,351			—		—			(1,863	)		2,709
Stock-based compensation expense		688			1,357			—			—		1,913			—			3,958
Interest expense		—			3,306			1,371			444		6,157			(4,677	)		6,601
Depreciation and amortization		277			2,218			—			798		322			(561	)		3,054
Personnel and other operating expenses		26,205			20,180			106			3,063		7,873			(15,474	)		41,953
Total expenses		126,381			129,078			6,789			4,305		16,265			(23,415	)		259,403
Income (loss) before income taxes (d)	$	112,821		$	38,416		$	1,357		$	4,976	$	(2,955	)	$	(1,159	)	$	153,456
Total revenue from non-affiliates (e)	$	220,099		$	178,030		$	9,811		$	7,598	$	6,350
Gross premiums written	$	283,649		$	222,717		$	55,522

(a)

Other revenue under real estate primarily consisted of rental income from investment properties.

(b)

Other revenue under corporate and other primarily consisted of revenue from marina operations and management fees for attorney-in-fact services.

(c)

Gross premiums earned under HCPCI Insurance Operations consist of $292,973 from HCPCI and $12,766 from a reinsurance company.

(d)

(e)

Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)


For Six Months Ended June 30, 2023	HCPCI Insurance Operations			TypTap Group			Real Estate (a)		Corporate/ Other (b)			Reclassification/ Elimination			Consolidated
Revenue:
Gross premiums earned (c)	$	198,781		$	172,683		$	—	$	—		$	(9,450	)	$	362,014
Premiums ceded		(80,648	)		(65,671	)		—		—			9,420			(136,899	)
Net premiums earned		118,133			107,012			—		—			(30	)		225,115
Net income from investment portfolio		7,347			6,981			—		3,527			8,701			26,556
Gain from sales of real estate investments		—			—			8,936		—			(8,936	)		—
Policy fee income		1,114			1,445			—		—			—			2,559
Other		8,370			2,833			5,055		1,272			(15,404	)		2,126
Total revenue		134,964			118,271			13,991		4,799			(15,669	)		256,356
Expenses:
Losses and loss adjustment expenses		56,435			67,993			—		—			(1,973	)		122,455
Amortization of deferred policy acquisition costs		19,621			23,285			—		—			—			42,906
Other policy acquisition expenses		1,272			1,208			—		—			(48	)		2,432
Stock-based compensation expense		994			1,487			—		1,492			—			3,973
Interest expense		—			861			270		5,198			(861	)		5,468
Depreciation and amortization		280			1,986			953		406			(773	)		2,852
Loss on extinguishment of debt		—			—			177		—			(177	)		—
Personnel and other operating expenses		18,835			19,371			3,055		3,444			(11,837	)		32,868
Total expenses		97,437			116,191			4,455		10,540			(15,669	)		212,954
Income (loss) before income taxes	$	37,527		$	2,080		$	9,536	$	(5,741	)	$	—		$	43,402
Total revenue from non-affiliates (d)	$	119,169		$	128,697		$	12,376	$	3,661
Gross premiums written	$	225,698		$	154,139

(a)

Other revenue under real estate primarily consisted of rental income from investment properties.

(b)

Other revenue under corporate and other primarily consisted of revenue from marina operations.

(c)

Gross premiums earned under HCPCI Insurance Operations consist of $189,331 from HCPCI and $9,450 from a reinsurance company.

(d)

Represents amounts before reclassification of certain revenue and expenses to conform with an insurance company’s presentation.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The following table presents segment assets reconciled to the Company’s total assets on the consolidated balance sheets:


	June 30,			December 31,
	2024			2023
Segments:
HCPCI Insurance Operations	$	1,021,739		$	933,116
TypTap Group		665,767			623,366
Reciprocal Exchange Operations		79,756			25,000
Real Estate Operations		136,895			132,257
Corporate and Other		324,136			233,952
Consolidation and Elimination		(316,912	)		(136,375	)
Total assets	$	1,911,381		$	1,811,316

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 15 -- Leases

The table below summarizes the Company’s right-of-use (“ROU”) assets and corresponding liabilities for operating and finance leases:


	June 30,		December 31,
	2024		2023
Operating leases:
ROU assets	$	1,296	$	1,407
Liabilities	$	1,305	$	1,408
Finance leases:
ROU assets	$	—	$	1
Liabilities	$	1	$	2

The following table summarizes the Company’s operating and finance leases in which the Company is a lessee:


		Renewal	Other Terms and
Class of Assets	Initial Term	Option	Conditions
Operating lease:
Office equipment	36 to 63 months	Yes	(a)
Office space	5 to 9 years	Yes	(a), (b)
Finance lease:
Office equipment	3.25 years	Not applicable	(c)

(a)

There are no variable lease payments.

(b)

Rent escalation provisions exist.

(c)

There is a bargain purchase option.

As of June 30, 2024, maturities of lease liabilities were as follows:


	Leases
	Operating		Finance
Due in 12 months following June 30,
2024	$	289	$	1
2025		299		—
2026		308		—
2027		303		—
2028		123		—
Thereafter		190		—
Total lease payments		1,512		1
Less: interest		207		—
Total lease obligations	$	1,305	$	1

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The following table provides quantitative information with regards to the Company’s operating and finance leases:


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2024			2023		2024		2023
Lease costs:
Finance lease costs:
Amortization – ROU assets*	$	—		$	4	$	—	$	8
Operating lease costs*		76			77		145		129
Short-term lease costs*		83			74		175		167
Total lease costs	$	159		$	155	$	320	$	304
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows – operating leases						$	142	$	73
Financing cash flows – finance leases						$	1	$	7

	June 30,
	2024
Weighted-average remaining lease term:
Finance leases (in years)		0.3
Operating leases (in years)		5.1
Weighted-average discount rate:
Finance leases (%)		2.4	%
Operating leases (%)		6.0	%

* Included in other operating expenses on the consolidated statements of income.

The following table summarizes the Company’s operating leases in which the Company is a lessor:


		Renewal	Other Terms
Class of Assets	Initial Term	Option	and Conditions
Operating lease:
Office space	1 to 3 years	Yes	(d)
Retail space	3 to 20 years	Yes	(d)
Boat docks/wet slips	1 to 12 months	Yes	(d)

(d)

There are no purchase options.

Note 16 -- Income Taxes

A valuation allowance must be established for deferred tax assets when it is more likely than not that the deferred tax assets will not be realized based on available evidence both positive and negative, including recent operating results, available tax planning strategies, and projected future taxable income. As of December 31, 2023, management concluded, based on the evaluation of the positive and negative evidence, that is more likely than not that the deferred tax assets will be realized and therefore no valuation allowance on the Company’s deferred tax assets is required. The Company evaluates the realizability of its deferred tax assets each quarter, and as of June 30, 2024, based on all of the available evidence, management concluded that it is more likely than not that the deferred tax assets will be realized.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

During the three months ended June 30, 2024 and 2023, the Company recorded income tax expenses of $18,927 and $5,384, respectively, resulting in effective tax rates of 24.9% and 26.6%, respectively. The decrease in the effective tax rate as compared with the corresponding period in the prior year was primarily attributable to the recognition of tax benefits related to restricted stock that vested in February and May 2024.

During the six months ended June 30, 2024 and 2023, the Company recorded approximately $39,401 and $10,727, respectively, resulting in effective tax rates of 25.7% and 24.7%, respectively. The increase in the effective tax rate as compared with the corresponding period in the prior year was primarily attributable to a lower prior year effective tax rate resulting from the release of the valuation allowance during 2023. The Company’s estimated annual effective tax rate differs from the statutory federal tax rate due to state and foreign income taxes as well as certain non-deductible and tax-exempt items.

Note 17 -- Earnings Per Share

U.S. GAAP requires the Company to use the two-class method in computing basic earnings (loss) per share since holders of the Company’s restricted stock have the right to share in dividends, if declared, equally with common stockholders. These participating securities affect the computation of both basic and diluted earnings (loss) per share during periods of net income or loss. For a majority-owned subsidiary, its basic and diluted earnings (loss) per share are first computed separately. Then, the Company’s proportionate share in that majority-owned subsidiary’s earnings is added to the computation of both basic and diluted earnings (loss) per share at a consolidated level.

A summary of the numerator and denominator of the basic and diluted earnings per common share is presented below:


	Three Months Ended							Three Months Ended
	June 30, 2024							June 30, 2023
	Income			Shares (a)		Per Share		Income			Shares (a)		Per Share
	(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount
Net income	$	57,099						$	14,882
Less: Net income attributable to redeemable noncontrolling interests		—							(2,337	)
Less: Net income attributable to noncontrolling interests		(3,023	)						(102	)
Net income attributable to HCI		54,076							12,443
Less: Income attributable to participating securities		(2,052	)						(427	)
Basic Earnings Per Share:
Income allocated to common stockholders		52,024			10,041	$	5.18		12,016			8,302	$	1.45
Effect of Dilutive Securities:
Stock options		—			298				—			74
Convertible senior notes		1,753			2,142				1,924			2,538
Warrants		—			215				—			7
Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	53,777			12,696	$	4.24	$	13,940			10,921	$	1.28

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

(a)

Shares in thousands.


	Six Months Ended							Six Months Ended
	June 30, 2024							June 30, 2023
	Income			Shares (a)		Per Share		Income			Shares (a)		Per Share
	(Numerator)			(Denominator)		Amount		(Numerator)			(Denominator)		Amount
Net income	$	114,055						$	32,675
Less: Net income attributable to redeemable noncontrolling interests		(10,149	)						(4,661	)
Less: Net income attributable to noncontrolling interests		(2,219	)						(233	)
Net income attributable to HCI		101,687							27,781
Less: Income attributable to participating securities		(3,243	)						(985	)
Basic Earnings Per Share:
Income allocated to common stockholders		98,444			9,897	$	9.95		26,796			8,290	$	3.23
Effect of Dilutive Securities: *
Stock options		—			290				—			58
Convertible senior notes		3,393			2,212				3,844			2,538
Warrants		—			262				—			—
Diluted Earnings Per Share:
Income available to common stockholders and assumed conversions	$	101,837			12,661	$	8.04	$	30,640			10,886	$	2.81

(a)

Shares in thousands.

* For the six months ended June 30, 2023, warrants were excluded due to anti-dilutive effect.

Note 18 -- Redeemable Noncontrolling Interests

The following table summarizes the redeemable noncontrolling interest balances at June 30, 2024 and December 31, 2023:


	June 30,		December 31,
	2024		2023
TTIG - Series A Preferred Stock	$	—	$	96,160
Subscriber surplus contribution		791		—
'Total redeemable noncontrolling interests	$	791	$	96,160

TTIG - Series A Preferred Stock

On January 22, 2024, TTIG entered into a Stock Redemption Agreement with Centerbridge which allowed TTIG to redeem all of the TTIG Series A Preferred Stock held by Centerbridge. The redemption totaled $100,000 plus accrued and unpaid dividends of approximately $2,923. At redemption, the difference between the consideration transferred of $102,923 and the redemption date carrying value of $96,695 is recorded as a deemed dividend and is included in net income attributable to redeemable noncontrolling interest which is subtracted from net income when calculating income available to common stockholders.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The following table summarizes the activity of TTIG Series A Preferred Stock during the six months ended June 30, 2024 and 2023:


	2024			2023
Balance at January 1	$	96,160		$	93,553
Increase (decrease):
Accrued cash dividends		424			1,637
Accretion - increasing dividend rates		111			687
Adjustment to maximum redemption value		6,228			—
Dividends paid		(2,923	)		(3,012	)
Redemption		(100,000	)		—
Balance at March 31	$	—		$	92,865
Increase (decrease):
Accrued cash dividends		—			1,875
Accretion - increasing dividend rates		—			462
Balance at June 30	$	—		$	95,202

For the three months ended June 30, 2024, net income attributable to redeemable noncontrolling interest was $0, compared with $2,337 for the three months ended June 30, 2023, consisting of accrued cash dividends of $1,875 and accretion related to increasing dividend rates of $462. For the six months ended June 30, 2024, net income attributable to redeemable noncontrolling interest was $10,149, consisting of accrued cash dividends of $424, accretion related to increasing dividend rates of $111, an adjustment to maximum redemption value of $6,228, and a deemed dividend resulting from warrant modifications of $3,386. For the six months ended June 30, 2023, net income attributable to redeemable noncontrolling interest was $4,661, consisting of accrued cash dividends $3,512 and accretion related to increasing dividend rates $1,149.

CORE - Subscriber Surplus Contribution

Subscriber surplus contributions in redeemable noncontrolling interests represent a refundable portion of the surplus contributions received from CORE policyholders.

The following table summarizes the activity of the subscriber surplus contribution during the six months ended June 30, 2024 and 2023:


	2024			2023
Balance at January 1	$	—		$	—
Cash contribution		—			—
Return of contribution		—			—
Noncash reclassification		—			—
Balance at March 31		—			—
Cash contribution		864			—
Return of contribution		—			—
Noncash reclassification		(73	)		—
Balance at June 30	$	791		$	—

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Note 19 -- Equity

Stockholders’ Equity

Common Stock

On January 22, 2024, a new shelf registration statement on Form S-3 (the “Shelf Registration”) was filed, replacing the Company’s old universal shelf registration statement filed in September 2023. The new Shelf Registration permits the Company to offer and sell its common stock, preferred stock, debt securities, warrants, and stock purchase contracts and units, from time to time, subject to market conditions and its capital needs. The Shelf Registration will also enable Centerbridge to sell all or a portion of the amended and restated warrant or the shares issuable pursuant to the warrant. As a part of the Shelf Registration, the Company also announced the implementation of an “at-the-market” facility (the “ATM facility”) under which the Company would have the ability to raise up to $75,000 through the issuance of new shares of common stock into the market if it were to so choose.

On April 24, 2024, the Company’s Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends were paid on June 21, 2024 to stockholders of record on May 17, 2024.

Warrants

In connection with the redemption of the TTIG Series A Preferred Stock held by Centerbridge in January 2024, HCI, for the benefit of TTIG, extended the expiration dates of 450,000 of the underlying warrant shares, which will now expire in 150,000 share increments on December 31, 2026, December 31, 2027, and December 31, 2028. The remaining 300,000 share warrants retained their original expiration date of February 26, 2025 and were exercised on March 11, 2024 through a cashless transaction. The warrant modifications resulted in a $3,386 increase in the fair value of the warrants, which is recorded as a deemed dividend by decreasing retained income and increasing additional paid-in capital. The amount of deemed dividend is included in net income attributable to redeemable noncontrolling interest which is subtracted from net income when calculating net income available to common stockholders

At June 30, 2024, there were warrants outstanding and exercisable, held by Centerbridge, to purchase 450,000 shares of HCI common stock at an exercise price of $54.40. The warrants expire in 150,000 share increments on December 31, 2026, December 31, 2027, and December 31, 2028.

Noncontrolling Interests

TTIG

During the three and six months ended June 30, 2024, TTIG repurchased and retired a total of 23,071 and 45,858 shares, respectively, of its common stock surrendered by its employees to satisfy payroll tax liabilities associated with the vesting of restricted shares. The total cost of purchasing noncontrolling interests during the three and six months ended June 30, 2024 was $49 and $82, respectively. During the three and six months ended June 30, 2023, TTIG repurchased and retired a total of 28,700 and 62,808 shares, respectively, of its common stock. The total cost of purchasing noncontrolling interests during the three and six months ended June 30, 2023 was $39 and $237, respectively.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

In addition, TTIG repurchased and retired a total of 6,830 shares of its common stock from former TTIG employees for a total cost of $12 for the three and six months ended June 30, 2024. The total cost included the fair value of TTIG common stock and a $2 inducement cost for the purpose of curtailing the spread of share ownership.

At June 30, 2024, there were 80,292,834 shares of TTIG’s common stock outstanding, of which 5,292,834 shares were not owned by HCI.

CORE

As described in Note 13 -- “Variable Interest Entity,” the Company has no equity interest at risk in CORE and CORE receives surplus contributions from its subscribers in addition to policy premiums. The surplus contribution is payable to CORE on or prior to the initial effective date of coverage and on or prior to the effective date of all endorsements generating an additional premium. CORE wrote 81 policies during the three and six months ended June 30, 2024.

Note 20 -- Stock-Based Compensation

2012 Omnibus Incentive Plan

The Company currently has outstanding stock-based awards granted under the Plan which is currently active and available for future grants. At June 30, 2024, there were 761,406 shares available for grant.

Stock Options

Stock options granted and outstanding under the incentive plan vest over a period of four years and are exercisable over the contractual term of ten years.

A summary of the stock option activity for the three and six months ended June 30, 2024 and 2023 is as follows (option amounts not in thousands):


					Weighted
			Weighted		Average
			Average		Remaining	Aggregate
	Number of		Exercise		Contractual	Intrinsic
	Options		Price		Term	Value
Outstanding at January 1, 2024		590,000	$	51.54	5.9 years	$	21,156
Outstanding at March 31, 2024		590,000	$	51.54	5.6 years	$	38,077
Outstanding at June 30, 2024		590,000	$	51.54	5.4 years	$	23,970
Exercisable at June 30, 2024		590,000	$	51.54	5.4 years	$	23,970

Outstanding at January 1, 2023		440,000	$	45.25	5.6 years	$	—
Outstanding at March 31, 2023		440,000	$	45.25	5.3 years	$	3,146
Outstanding at June 30, 2023		440,000	$	45.25	5.1 years	$	7,863
Exercisable at June 30, 2023		412,500	$	45.07	5.0 years	$	7,447

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

There were no options exercised during the three and six months ended June 30, 2024 and 2023. For the three months ended June 30, 2024 and 2023, the Company recognized $0 and $76, respectively, of compensation expense related to stock options which is included in general and administrative personnel expenses. For the six months ended June 30, 2024 and 2023, the Company recognized $14 and $166, respectively, of compensation expense. There were no deferred tax benefits related to stock options recognized for the three and six months ended June 30, 2024 and 2023. At June 30, 2024 and December 31, 2023, there was $0 and $14, respectively, of unrecognized compensation expense related to nonvested stock options.

Restricted Stock Awards

From time to time, the Company has granted and may grant restricted stock awards to certain executive officers, other employees, and non-employee directors in connection with their service to the Company. The terms of the Company’s outstanding restricted stock grants may include service, performance, and market-based conditions. The determination of fair value with respect to the awards containing only service-based conditions is based on the market value of the Company’s common stock on the grant date. For awards with market-based conditions, the fair value is determined using a Monte Carlo simulation method, which calculates many potential outcomes for an award and then establishes fair value based on the most likely outcome.

On April 17, 2024, the Company awarded Paresh Patel, its Chief Executive Officer, 200,000 restricted shares of common stock. The shares will vest equally over a period of four years, with vesting dates of March 15, 2025, 2026, 2027, and 2028, under the condition that the price per share reaches $200 for a period of 30 consecutive trading days.

Information with respect to the activity of unvested restricted stock awards during the three and six months ended June 30, 2024 and 2023 is as follows:


	Number of			Weighted
	Restricted			Average
	Stock			Grant Date
	Awards			Fair Value
Nonvested at January 1, 2024		271,417		$	37.12
Vested		(29,690	)	$	56.05
Forfeited		(200	)	$	51.87
Nonvested at March 31, 2024		241,527		$	34.78
Granted		204,500		$	79.33
Vested		(19,637	)	$	48.17
Forfeited		(3,500	)	$	34.58
Nonvested at June 30, 2024		422,890		$	55.70

Nonvested at January 1, 2023		342,459		$	39.86
Granted		6,000		$	51.76
Vested		(40,352	)	$	54.83
Forfeited		(2,125	)	$	40.33
Nonvested at March 31, 2023		305,982		$	38.11
Granted		7,000		$	58.52
Vested		(34,689	)	$	45.56
Forfeited		(295	)	$	55.41
Nonvested at June 30, 2023		277,998		$	37.68

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

The Company recognized compensation expense related to restricted stock, which is included in general and administrative personnel expenses, of $1,720 and $1,133 for the three months ended June 30, 2024 and 2023, respectively, and $2,587 and $2,320 for the six months ended June 30, 2024 and 2023, respectively. At June 30, 2024 and December 31, 2023, there was approximately $17,547, and $4,043, respectively, of total unrecognized compensation expense related to nonvested restricted stock arrangements. The Company expects to recognize the remaining compensation expense over a weighted-average period of 2.8 years. The following table summarizes information about deferred tax benefits recognized and tax benefits realized related to restricted stock awards and paid dividends, and the fair value of vested restricted stock for the three and six months ended June 30, 2024 and 2023.


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Deferred tax benefits recognized	$	61	$	254	$	160	$	517
Tax benefits realized for restricted stock and paid dividends	$	543	$	521	$	1,054	$	820
Fair value of vested restricted stock	$	946	$	1,580	$	2,610	$	3,793

Subsidiary Equity Plan

For the three months ended June 30, 2024 and 2023, TypTap Group recognized compensation expense related to its stock-based awards of $656 and $658, respectively. For the six months ended June 30, 2024 and 2023, TypTap Group recognized compensation expense related to its stock-based awards of $1,357 and $1,487, respectively. At June 30, 2024 and December 31, 2023, there was $3,022 and $4,438, respectively, of unrecognized compensation expense related to nonvested subsidiary restricted stock and stock options.

Note 21 -- Commitments and Contingencies

Capital Commitments

As described in Note 5 -- “Investments” under Limited Partnership Investments, the Company is contractually committed to capital contributions for limited partnership interests. At June 30, 2024, there was an aggregate unfunded balance of $3,353.

FIGA Assessments

The Company’s insurance subsidiaries, as member insurers, are required to collect and remit the pass-through assessments to FIGA on a quarterly basis. As of June 30, 2024, the FIGA assessments payable by the Company were $2,378.

Note 22 -- Related Party Transactions

HCPCI and TypTap have reinstatement premium protection reinsurance contracts (“RPP”) with various reinsurers. For one of the RPP contracts, Oxbridge Reinsurance Limited (“Oxbridge”) participates as a subscribing reinsurer. One of the Company’s non-employee directors, Jay Madhu, serves as Oxbridge’s chairman of its board of directors and chief executive officer and is an investor in that company. Under the contracts, Oxbridge agrees to indemnify HCPCI and TypTap for a portion of reinstatement premium which HCPCI or TypTap pays or becomes liable to pay to reinstate reinsurance protection. The $1,099 premium is paid over four installments, each of which is to be deposited into a trust account in order to fully collateralize Oxbridge’s obligations.

HCI GROUP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

(Amounts in thousands, except share and per share amounts, unless otherwise stated)

Trust assets may be withdrawn by HCPCI and TypTap or the trust beneficiaries in the event amounts are due under the 2024-2025 RPP contracts.

Note 23 -- Subsequent Events

On July 1, 2024, HCI entered into a Stock Purchase Agreement (“Purchase Agreement”) with TTIG, its majority-owned subsidiary. Pursuant to the Purchase Agreement, TTIG transferred to HCI 2,500,000 shares of TypTap Insurance Company (“TTIC”)’s $1.00 par value common stock which represented all of the issued and outstanding capital stock of TTIC. In exchange, HCI agreed to consider three promissory notes issued by TTIG, totaling $117,994 in principal, as fully repaid with the exception of a 2.00% promissory note due June 1, 2025. This promissory note will remain in effect with its principal balance reduced from $40,000 to $2,994. As there was no change in control, the purchase was accounted for as a common control transaction. The net assets of TTIC were derecognized by TTIG and recognized by HCI at their carrying amounts on the date of the purchase. The difference between the consideration transferred and the carrying amounts of the net assets was recognized in equity. Further, the sale triggers a change in control clause within TTIG’s equity incentive plan, causing all unvested stock-based awards to vest immediately except for TTIG restricted stock and stock options issued to Paresh Patel who is also the Chief Executive Officer of HCI. The expense from immediate vesting approximated $1,087.

On July 3, 2024, the Company’s Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends are payable on September 20, 2024 to stockholders of record on August 16, 2024.

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion under this Item 2 in conjunction with our consolidated financial statements and related notes and information included elsewhere in this quarterly report on Form 10-Q and in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 8, 2024. Unless the context requires otherwise, as used in this Form 10-Q, the terms “HCI,” “we,” “us,” “our,” “the Company,” “our company,” and similar references refer to HCI Group, Inc., a Florida corporation incorporated in 2006, and its subsidiaries. All dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are in whole dollars unless specified otherwise.

Forward-Looking Statements

In addition to historical information, this quarterly report contains forward-looking statements as defined under federal securities laws. Such statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements. Typically, forward-looking statements can be identified by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions. The important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include but are not limited to the effects of governmental regulation; changes in insurance regulations; the frequency and extent of claims; uncertainties inherent in reserve estimates; catastrophic events; changes in the demand for, pricing of, availability of or collectability of reinsurance; restrictions on our ability to change premium rates; increased rate pressure on premiums; the severity and impact of a pandemic; and other risks and uncertainties detailed herein and from time to time in our SEC reports.

OVERVIEW – General

HCI Group, Inc. is a Florida-based insurance company with operations in property and casualty insurance, information technology services, insurance management, real estate and reinsurance. We utilize innovative technology to promote efficiency, refine risk assessment and enhance experiences for clients throughout the insurance process. We manage our operations in the following organizational segments, based on managerial emphasis and evaluation of financial and operating performances:

HCPCI Insurance Operations

▪

Property and casualty insurance

▪

Reinsurance and other auxiliary operations

TypTap Group

▪

Property and casualty insurance

▪

Information technology

Reciprocal Exchange Operations

Real Estate Operations

Other Operations

▪

Holding company operations

For the three months ended June 30, 2024 and 2023, revenues from HCPCI insurance operations before intracompany elimination represented 57.3% and 65.1%, respectively, and revenues from TypTap Group represented 37.2% and 33.4%, respectively, of total revenues of all operating segments. For the six months ended June 30, 2024 and 2023, revenues from HCPCI insurance operations before intracompany elimination represented 60.2% and 63.3%, respectively, and revenues from TypTap Group represented 35.7% and 34.9%, respectively, of total revenues of all operating segments. At June 30, 2024 and December 31, 2023, HCPCI insurance operations’ total assets represented 54.9% and 55.3%, respectively, and TypTap Group’s total assets represented 32.0% and 33.6%, respectively, of the combined assets of all operating segments. See Note 14 -- “Segment Information” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

HCPCI Insurance Operations

Property and Casualty Insurance

HCPCI provides various forms of residential insurance products such as homeowners insurance, fire insurance, and wind-only insurance. HCPCI is authorized to write residential property and casualty insurance in the states of Arkansas, California, Connecticut, Florida, Maryland, Massachusetts, New Jersey, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina and Texas. Currently, Florida is HCPCI’s primary market.

Reinsurance and other auxiliary operations

We have a Bermuda domiciled wholly-owned reinsurance subsidiary, Claddaugh Casualty Insurance Company Ltd (“Claddaugh”). We selectively retain risk in Claddaugh, reducing the cost of third-party reinsurance. Claddaugh fully collateralizes its exposure to HCPCI, TypTap, and CORE by depositing funds into a trust account. Claddaugh may mitigate a portion of its risk through retrocession contracts, however Claddaugh did not enter into any retrocession contracts for the 2024-2025 treaty year. Currently, Claddaugh does not provide reinsurance to non-affiliates. Other auxiliary operations also include claim adjusting and processing services.

TypTap Group

TypTap Insurance Group, Inc. (“TTIG”), our majority-owned subsidiary, currently has five subsidiaries: TypTap Insurance Company (“TypTap”), TypTap Management Company, Exzeo USA, Inc., Dark Horse Re, LLC (“Dark Horse”), and Cypress Tech Development Company which also owns Exzeo Software Private Limited, a subsidiary domiciled in India. TTIG is primarily engaged in the property and casualty insurance business and uses internally developed software technologies to drive efficiency in claim processing and claims settlements, identify profitable underwriting opportunities, generate savings and streamline operations across its insurance operations. In addition, software is also used to analyze potential and current properties based on statistical models for catastrophic events, allowing us to pursue the optimal candidates for insurance coverage. Dark Horse is a recently formed subsidiary that specializes in providing expert reinsurance brokerage services.

Property and Casualty Insurance

TypTap, TTIG’s insurance subsidiary, has been the primary source of our organic growth in gross written premium. TypTap’s policies in force have increased from 6,721 in January 2018 to 97,004 at June 30, 2024. TypTap has been successful in using internally developed proprietary technology to underwrite, select and write policies efficiently. Since TypTap began applying for approval to offer homeowners coverage in states outside of Florida in October 2020, TypTap has received approvals from 31 states.

Information Technology

Our information technology operations include a team of experienced software developers with extensive knowledge in designing and creating web-based applications. The operations, which are located in Tampa, Florida and Noida, India, are focused on developing cloud-based, innovative products and services that support in-house operations as well as our third-party relationships with our agency partners and claim vendors. These products include SAMSTM, HarmonyTM, AtlasViewer® and ClaimColonyTM.

Reciprocal Exchange Operations

This segment encompasses the reciprocal exchange operations under our management. Condo Owners Reciprocal Exchange (“CORE”), organized in November 2023 to offer commercial residential multiple peril and wind insurance products, is owned by its policyholders, referred to as subscribers, who gain ownership by buying an insurance policy. The subscribers then assume one another’s risks by exchanging insurance contracts, so they are both the insurers and the insureds. The daily operations of CORE are directly or indirectly conducted by Core Risk Managers, LLC (“CRM”), an AIF company. Such daily operations include general administration, marketing, underwriting, accounting, policy administration, claim adjusting, and information technology. CRM is permitted to outsource any of these services to other HCI subsidiaries. See Note 13 -- “Variable Interest Entity” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

Real Estate Operations

Our real estate operations consist of multiple properties we own and operate for investment purposes and also properties we own and use for our own operations. Properties used in operations consist of two Tampa office buildings and an insurance operations site in Ocala, Florida. Our investment properties include retail shopping centers, two marinas, undeveloped land in Tampa and land under development in Haines City, Florida.

Other Operations

Holding company operations

Activities of our holding company, HCI Group, Inc., plus other companies that do not meet the quantitative and qualitative thresholds for a reportable segment comprise the operations of this segment.

Recent Events

On July 1, 2024, HCI entered into a Stock Purchase Agreement (“Purchase Agreement”) with TTIG, its majority-owned subsidiary. Pursuant to the Purchase Agreement, TTIG transferred to HCI 2,500,000 shares of TypTap Insurance Company (“TTIC”)’s $1.00 par value common stock which represented all of the issued and outstanding capital stock of TTIC. In exchange, HCI agreed to consider three promissory notes issued by TTIG, totaling $117,994,000 in principal, as fully repaid with the exception of a 2.00% promissory note due June 1, 2025. This promissory note will remain in effect with its principal balance reduced from $40,000,000 to $2,994,000. As there was no change in control, the purchase was accounted for as a common control transaction. The net assets of TTIC were derecognized by TTIG and recognized by HCI at their carrying amounts on the date of the purchase. The difference between the consideration transferred and the carrying amounts of the net assets was recognized in equity. Further, the sale triggers a change in control clause within TTIG’s equity incentive plan, causing all unvested stock-based awards to vest immediately except for TTIG restricted stock and stock options issued to Paresh Patel who is also the Chief Executive Officer of HCI. The expense from immediate vesting approximated $1,087,000.

On July 3, 2024, our Board of Directors declared a quarterly dividend of $0.40 per common share. The dividends are payable on September 20, 2024 to stockholders of record on August 16, 2024.

RESULTS OF OPERATIONS

The following table summarizes our results of operations for the three and six months ended June 30, 2024 and 2023 (dollar amounts in thousands, except per share amounts):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Revenue
Gross premiums earned	$	263,561		$	181,946		$	520,205		$	362,014
Premiums ceded		(76,713	)		(66,390	)		(144,819	)		(136,899	)
Net premiums earned		186,848			115,556			375,386			225,115
Net investment income		16,881			8,794			30,948			26,509
Net realized investment gains (losses)		212			(230	)		212			(1,379	)
Net unrealized investment gains		533			897			3,168			1,426
Policy fee income		1,089			1,469			2,108			2,559
Other income		682			841			1,037			2,126
Total revenue		206,245			127,327			412,859			256,356
Expenses
Losses and loss adjustment expenses		78,324			61,890			158,246			122,455
Policy acquisition and other underwriting expenses		23,452			22,618			45,591			45,338
General and administrative personnel expenses		17,471			14,272			33,745			27,774
Interest expense		3,452			2,667			6,601			5,468
Other operating expenses		7,520			5,614			15,220			11,919
Total expenses		130,219			107,061			259,403			212,954
Income before income taxes		76,026			20,266			153,456			43,402
Income tax expense		18,927			5,384			39,401			10,727
Net income		57,099			14,882			114,055			32,675
Net income attributable to noncontrolling interests		(3,023	)		(2,439	)		(12,368	)		(4,894	)
Net income after noncontrolling interests	$	54,076		$	12,443		$	101,687		$	27,781
Ratios to Net Premiums Earned:
Loss Ratio		41.92	%		53.56	%		42.16	%		54.40	%
Expense Ratio (excluding interest expense)		25.93	%		36.78	%		25.19	%		37.77	%
Combined Ratio (excluding interest expense)		67.85	%		90.34	%		67.35	%		92.17	%
Ratios to Gross Premiums Earned:
Loss Ratio		29.72	%		34.02	%		30.42	%		33.83	%
Expense Ratio (excluding interest expense)		18.38	%		23.36	%		18.18	%		23.49	%
Combined Ratio (excluding interest expense)		48.10	%		57.38	%		48.60	%		57.31	%
Earnings (Loss) Per Share Data:
Basic	$	5.18		$	1.45		$	9.95		$	3.23
Diluted	$	4.24		$	1.28		$	8.04		$	2.81

Comparison of the Three Months Ended June 30, 2024 to the Three Months Ended June 30, 2023

Our results of operations for the three months ended June 30, 2024 reflect net income of approximately $57,099,000 or $4.24 diluted earnings per share, compared with net income of approximately $14,882,000 or $1.28 diluted earnings per share, for the three months ended June 30, 2023. The quarter-over-quarter increase was primarily due to a $71,292,0000 increase in net premiums earned and a $8,165,000 net increase in income from our investment portfolio (consisting of net investment income and net realized and unrealized gains or losses), offset by a $16,434,000 increase in losses and loss adjustment expenses and a $3,199,000 increase in general and administrative personnel expenses.

Revenue

Gross Premiums Earned on a consolidated basis for the three months ended June 30, 2024 and 2023 were approximately $263,561,000 and $181,946,000, respectively. The $81,615,000 increase was primarily attributable to the policies assumed from Citizens and some impact from premium rate increases. Gross premiums earned from policies assumed were $61,770,000 for the three months ended June 30, 2024 compared with $0 for the three months ended June 30, 2023. HCPCI gross premiums earned were $150,357,000 for the three months ended June 30, 2024 compared with $96,875,000 for the three months ended June 30, 2023. TypTap Group’s gross premiums earned were $107,055,000 compared with $85,071,000 for the same comparative period in 2023. Gross premiums earned from reciprocal exchange operations were $12,804,000 for the three months ended June 30, 2024 as opposed to $0 for the three months ended June 30, 2023.

Premiums Ceded for the three months ended June 30, 2024 and 2023 were approximately $76,713,000 and $66,390,000, respectively, representing 29.1% and 36.5%, respectively, of gross premiums earned. The $10,323,000 increase was primarily attributable to increased reinsurance coverage due to growth in the number of policies in force and total insured value.

Our premiums ceded represent costs of reinsurance to cover losses from catastrophes that exceed the retention levels defined by our catastrophe excess of loss reinsurance contracts or to assume a proportional share of losses as defined in a quota share agreement. The rates we pay for reinsurance are based primarily on policy exposures reflected in gross premiums earned. Reinsurance costs can be decreased by a reduction in premiums ceded attributable to retrospective provisions under reinsurance contracts. For each of the three months ended June 30, 2024 and 2023, premiums ceded included a decrease of $6,993,000 related to retrospective provisions. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”

Net Premiums Written for the three months ended June 30, 2024 and 2023 totaled approximately $230,189,000 and $113,593,000, respectively. Net premiums written represent the premiums charged on policies issued during a fiscal period less any applicable reinsurance costs. The increase in 2024 primarily resulted from an increase in premiums written resulting from increased policies in force, offset by increased premiums ceded to reinsurers as described above. We had approximately 242,500 policies in force at June 30, 2024 as compared with approximately 200,000 policies in force at June 30, 2023.

Net Premiums Earned for the three months ended June 30, 2024 and 2023 were approximately $186,848,000 and $115,556,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.

The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the three months ended June 30, 2024 and 2023 (amounts in thousands):


	Three Months Ended
	June 30,
	2024			2023
Net Premiums Written	$	230,189		$	113,593
(Increase) Decrease in Unearned Premiums		(43,341	)		1,963
Net Premiums Earned	$	186,848		$	115,556

Net Investment Income for the three months ended June 30, 2024 and 2023 was approximately $16,881,000 and $8,794,000, respectively. The $8,087,000 increase was attributable to a $4,556,000 increase in interest income from cash, cash equivalents, and available-for-sale fixed-maturity securities and a $3,513,000 increase in income from real estate investments, offset by a $98,000 decrease in income from limited partnership investments. See Net Investment Income under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Expenses

Our consolidated Losses and Loss Adjustment Expenses amounted to approximately $78,324,000 and $61,890,000 for the three months ended June 30, 2024 and 2023, respectively. The losses and loss adjustment expenses of HCPCI Insurance Operations were $37,856,000 and $27,653,000 for the three months ended June 30, 2024 and 2023, respectively. The increase was attributable to a higher number of policies in force, offset by lower claims and litigation frequency related to Florida policies. Losses and loss adjustment expenses for TypTap Group were $38,790,000 compared with $34,937,000 for the same comparative period. The increase was attributable to higher number of policies in force, offset by lower claims and litigation frequency related to Florida policies. Losses and loss adjustment expenses for reciprocal exchange operations were $1,605,000 for the three months ended June 30, 2024, resulting from the policies assumed from Citizens during 2024. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

Policy Acquisition and Other Underwriting Expenses for the three months ended June 30, 2024 and 2023 were approximately $23,452,000 and $22,618,000 on a consolidated basis, respectively, and primarily reflect the amortization of deferred acquisition costs such as commissions payable to agents for production and renewal of policies and premium taxes. Policy acquisition and other underwriting expenses for HCPCI Insurance Operations were $11,626,000 for the three months ended June 30, 2024 compared with $10,617,000 for the three months ended June 30, 2023. The increase in amortized costs was primarily due to an increase in premiums in force. TypTap Group’s policy acquisition and other underwriting expenses were $11,360,000 compared with $12,019,000 for the same comparative period, with the decrease due to higher amortized costs attributable to the accelerated transition of United policies during 2023, and lower policy acquisition costs in Florida resulting from lower commissions. Policy acquisition and other underwriting expenses, net of intercompany transactions, for reciprocal exchange operations were $484,000 for the three months ended June 30, 2024, primarily resulting from the policies assumed from Citizens during 2024

General and Administrative Personnel Expenses for the three months ended June 30, 2024 and 2023 were approximately $17,471,000 and $14,272,000, respectively. Our general and administrative personnel expenses include salaries, wages, payroll taxes, stock-based compensation expenses, and employee benefit costs. Factors such as merit increases, changes in headcount, and periodic restricted stock grants, among others, cause fluctuations in this expense. In addition, our personnel expenses are decreased by the capitalization of payroll costs related to projects to develop software for internal use and the payroll costs associated with the processing and settlement of certain catastrophe claims which are recoverable from reinsurers under reinsurance contracts. The quarter-over-quarter increase of $3,199,000 was primarily attributable to lower payroll costs recoverable from reinsurers, decreased capitalized payroll costs for software development, and an increase in stock-based compensation expense related to the restricted stock awarded in April 2024.

Interest Expense for the three months ended June 30, 2024 and 2023 was approximately $3,452,000 and $2,667,000, respectively. The increase was primarily attributable to interest expense related to the revolving credit facility, partially offset by decreased interest expense resulting from the conversion and redemption of the 4.25% Convertible Senior Notes in March 2024.

Income Tax Expense for the three months ended June 30, 2024 and 2023 was approximately $18,927,000 and $5,384,000, respectively, for state, federal, and foreign income taxes, resulting in effective tax rates of 24.9% and 26.6%, respectively. The decrease in the effective tax rate was primarily attributable to the recognition of tax benefits related to restricted stock that vested in February and May 2024.

Ratios:

The loss ratio applicable to the three months ended June 30, 2024 (losses and loss adjustment expenses incurred related to net premiums earned) was 41.9% compared with 53.5% for the three months ended June 30, 2023. The decrease was primarily attributable to the increase in net premiums earned, offset in part by the increase in losses and loss adjustment expenses.

The expense ratio applicable to the three months ended June 30, 2024 (defined as total expenses excluding losses and loss adjustment expenses and interest expense related to net premiums earned) was 25.9% compared with 36.8% for the three months ended June 30, 2023. The decrease in our expense ratio was primarily attributable to the increase in net premiums earned, offset in part by the increase in general and administrative personnel expenses and the increase in other operating expenses.

The combined ratio (total of all expenses excluding interest expense in relation to net premiums earned) is the measure of overall underwriting profitability before other income. Our combined ratio for the three months ended June 30, 2024 was 67.8% compared with 90.3% for the three months ended June 30, 2023. The decrease in 2024 was attributable to the factors described above.

Comparison of the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023

Our results of operations for the six months ended June 30, 2024 reflect net income of approximately $114,055,000 or $8.04 diluted earnings per share, compared with net income of approximately $32,675,000 or $2.81 diluted earnings per share, for the six months ended June 30, 2023. The period-over-period increase was primarily due to a $150,271,000 increase in net premiums earned and a $7,772,000 increase in income from our investment portfolio, offset by a $35,791,000 increase in losses and loss adjustment expense, a $5,971,000 increase in general and administrative personnel expenses, and a $3,301,000 increase in other operating expenses.

Revenue

Gross Premiums Earned on a consolidated basis for the six months ended June 30, 2024 and 2023 were approximately $520,205,000 and $362,014,000, respectively. The $158,191,000 increase was primarily attributable to the policies assumed from Citizens and some impact from premium rate increases. Gross premiums earned from insurance policies assumed were $128,739,000 for the six months ended June 30, 2024 compared with $7,163,000 for the six months ended June 30, 2023. HCPCI gross premiums earned were $305,739,000 for the six months ended June 30, 2024 compared with $189,331,000 for the six months ended June 30, 2023. TypTap Group’s gross premiums earned were $210,803,000 compared with $172,683,000 for the same comparative period in 2023. Gross premiums earned from reciprocal exchange operations were $16,429,000 for the six months ended June 30, 2024 as opposed to $0 for the six months ended June 30, 2023.

Premiums Ceded for the six months ended June 30, 2024 and 2023 were approximately $144,819,000 and $136,899,000, respectively, representing 27.8% and 37.8%, respectively, of gross premiums earned. The $7,920,000 increase was primarily attributable to increased reinsurance coverage due to growth in the number of policies in force and total insured value.

For each of the six months ended June 30, 2024 and 2023, premiums ceded included a decrease of $13,986,000 related to retrospective provisions. See “Economic Impact of Reinsurance Contracts with Retrospective Provisions” under “Critical Accounting Policies and Estimates.”

Net Premiums Written for the six months ended June 30, 2024 and 2023 totaled approximately $417,069,000 and $242,938,000, respectively. The increase in 2024 primarily resulted from the factors described earlier.

Net Premiums Earned for the six months ended June 30, 2024 and 2023 were approximately $375,386,000 and $225,115,000, respectively, and reflect the gross premiums earned less reinsurance costs as described above.

The following is a reconciliation of our total Net Premiums Written to Net Premiums Earned for the six months ended June 30, 2024 and 2023 (amounts in thousands):


	Six Months Ended
	June 30,
	2024			2023
Net Premiums Written	$	417,069		$	242,938
Increase in Unearned Premiums		(41,683	)		(17,823	)
Net Premiums Earned	$	375,386		$	225,115

Net Investment Income for the six months ended June 30, 2024 and 2023 was approximately $30,948,000 and $26,509,000, respectively. The $4,439,000 increase was primarily attributable to a $8,871,000 increase in interest income from cash, cash equivalents, and available-for-sale fixed-maturity securities, offset by a $4,287,000 decrease in income from real estate investments. See Net Investment Income under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Net Realized Investment Gains for the six months ended June 30, 2024 were approximately $212,000 compared with net realized investment losses of approximately $1,379,000 for the six months ended June 30, 2023. The increase was attributable to a $836,000 increase in realized gains from the sale of equity securities and a $708,000 decrease in realized losses from the sale of available-for-sale fixed-maturity securities.

Net Unrealized Investment Gains for the six months ended June 30, 2024 and 2023 were approximately $3,168,000 and $1,426,000, respectively. The increase was primarily attributable to an overall improvement in the equity market compared with the six months ended June 30, 2023.

Expenses

Our consolidated Losses and Loss Adjustment Expenses amounted to approximately $158,246,000 and $122,455,000 for the six months ended June 30, 2024 and 2023, respectively. The increase was attributable to a greater number of policies in force, offset by lower claims and litigation frequency related to Florida policies. The losses and loss adjustment expenses of HCPCI Insurance Operations were $76,870,000 and $56,435,000 for the six months ended June 30, 2024 and 2023, respectively. Losses and loss adjustment expenses for TypTap Group were $79,343,000 compared with $67,993,000 for the same comparative period. Losses and loss adjustment expenses for reciprocal exchange operations were $2,873,000 for the six months ended June 30, 2024. See “Reserves for Losses and Loss Adjustment Expenses” under “Critical Accounting Policies and Estimates.”

Policy Acquisition and Other Underwriting Expenses for the six months ended June 30, 2024 and 2023 were approximately $45,591,000 and $45,338,000, respectively. Policy acquisition and other underwriting expenses for HCPCI Insurance Operations were $22,341,000 for the six months ended June 30, 2024 compared with $20,893,000 for the six months ended June 30, 2023. The increase in amortized costs was primarily due to increased premiums in force. TypTap Group’s policy acquisition and other underwriting expenses were $22,674,000 compared with $24,493,000 for the same comparative period, with the decrease due to higher amortized costs attributable to the accelerated transition of United policies during 2023, offset by lower policy acquisition costs in Florida resulting from lower commissions. Policy acquisition and other underwriting expenses, net of intercompany transactions, for reciprocal exchange operations were approximately $632,000 for the six months ended June 30, 2024, primarily resulting from policy assumptions from Citizens during 2024.

General and Administrative Personnel Expenses for the six months ended June 30, 2024 and 2023 were approximately $33,745,000 and $27,774,000, respectively. The period-over-period increase of $5,971,000 was primarily attributable to an increase in employee incentive bonuses, lower payroll costs recoverable from reinsurers, and a decrease in capitalized payroll costs for software development.

Interest Expense for the six months ended June 30, 2024 and 2023 was approximately $6,601,000 and $5,468,000, respectively. The increase was primarily attributable to an increase in interest expense related to the revolving credit facility, partially offset by decreased interest expense resulting from the conversion and redemption of the 4.25% Convertible Senior Notes in March 2024.

Income Tax Expense for the six months ended June 30, 2024 and 2023 was approximately $39,401,000 and $10,727,000, respectively, for state, federal, and foreign income taxes, resulting in effective tax rates of 25.7% and 24.7%, respectively. The increase in the effective tax rate was primarily attributable to a lower prior year effective tax rate resulting from the release of valuation allowance during 2023.

Ratios:

The loss ratio applicable to the six months ended June 30, 2024 (losses and loss adjustment expenses incurred related to net premiums earned) was 42.2% compared with 54.4% for the six months ended June 30, 2023. The decrease was primarily attributable to the increase in net premiums earned, offset in part by the increase in losses and loss adjustment expenses.

The expense ratio applicable to the six months ended June 30, 2024 (defined as total expenses excluding losses and loss adjustment expenses and interest expense related to net premiums earned) was 25.2% compared with 37.8% for the six months ended June 30, 2023. The decrease in our expense ratio was primarily attributable to the increase in net premiums earned, offset by the increase in general and administrative personnel expenses and the increase in other operating expenses.

The combined ratio (total of all expenses excluding interest expense in relation to net premiums earned) is the measure of overall underwriting profitability before other income. Our combined ratio for the six months ended June 30, 2024 was 67.4% compared with 92.2% for the six months ended June 30, 2023. The decrease in 2024 was attributable to the factors described above.

Seasonality of Our Business

Our insurance business is seasonal as hurricanes and tropical storms affecting Florida, our primary market, and other southeastern states typically occur during the period from June 1st through November 30th of each year. Winter storms in the northeast usually occur during the period between December 1st and March 31st of each year. Also, with our reinsurance treaty year typically effective on June 1st of each year, any variation in the cost of our reinsurance, whether due to changes in reinsurance rates, coverage levels or changes in the total insured value of our policy base, will occur and be reflected in our financial results beginning on June 1st of each year.

LIQUIDITY AND CAPITAL RESOURCES

Throughout our history, our liquidity requirements have been met through issuances of our common and preferred stock, debt offerings and funds from operations. We expect our future liquidity requirements will be met by funds from operations, primarily the cash received by our insurance subsidiaries from premiums written and investment income. We may consider raising additional capital through debt and/or equity offerings to support our growth and future investment opportunities.

Our insurance subsidiaries require liquidity and adequate capital to meet ongoing obligations to policyholders and claimants and to fund operating expenses. In addition, we attempt to maintain adequate levels of liquidity and surplus to manage any differences between the duration of our liabilities and invested assets. In the insurance industry, cash collected for premiums from policies written is invested, interest and dividends are earned thereon, and losses and loss adjustment expenses are paid out over a period of years. This period of time varies by the circumstances surrounding each claim. With the exception of litigated claims, substantially all of our losses and loss adjustment expenses are fully settled and paid within approximately 100 days of the claim receipt date. Additional cash outflow occurs through payments of underwriting costs such as commissions, taxes, payroll, and general overhead expenses.

We believe that we maintain sufficient liquidity to pay claims and expenses, as well as to satisfy commitments in the event of unforeseen events such as reinsurer insolvencies, inadequate premium rates, or reserve deficiencies. We maintain a comprehensive reinsurance program at levels management considers adequate to diversify risk and safeguard our financial position.

In the future, we anticipate our primary use of funds will be to pay claims, reinsurance premiums, interest, and dividends and to fund operating expenses and real estate acquisitions.

Revolving Credit Facility, Convertible Senior Notes, Promissory Notes, and Finance Leases

The following table summarizes the principal and interest payment obligations of our indebtedness at June 30, 2024:


	Maturity Date	Payment Due Date
4.75% Convertible Senior Notes*	June 2042	June 1 and December 1
4.55% Promissory Note	Through August 2036	1st day of each month
5.50% Promissory Note	Through July 2033	1st day of each month
Finance leases	Through October 2024	Various
Revolving credit facility	Through November 2028	January 1, April 1, July 1, October 1


*	At the option of the noteholders, we may be required to repurchase for cash all or any portion of the notes on June 1, 2027, June 1, 2032 or June 1, 2037.

See Note 10 -- “Long-Term Debt” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Limited Partnership Investments

Our limited partnership investments consist of six private equity funds managed by their general partners. Two of these funds have unexpired capital commitments which are callable at the discretion of the fund’s general partner for funding new investments or expenses of the fund. Although capital commitments for the four remaining funds have expired, the general partners may request additional funds under certain circumstances.

At June 30, 2024, there was an aggregate unfunded capital balance of $3,353,000. See Limited Partnership Investments under Note 4 -- “Investments” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Real Estate Investment

Real estate has long been a significant component of our overall investment portfolio. It diversifies our portfolio and helps offset the volatility of other higher-risk assets. Thus, we may consider expanding our real estate investment portfolio should an opportunity arise.

Sources and Uses of Cash

Cash Flows for the Six Months Ended June 30, 2024

Net cash provided by operating activities for the six months ended June 30, 2024 was approximately $152,985,000, which consisted primarily of cash received from net premiums written, and reinsurance recoveries of approximately $49,334,000 less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash used in investing activities of $179,433,000 was primarily due to the purchases of fixed-maturity and equity securities of $506,438,000, purchases of property and equipment of $2,039,000, and purchases of real estate investments of $9,909,000, offset by the proceeds from calls, repayments and maturities of fixed-maturity securities of $323,568,000, the proceeds from sales of fixed-maturity and equity securities of $14,199,000, and distributions received from limited partnership investments of $2,292,000. Net cash used in financing activities totaled $64,174,000, which was primarily due to the redemption of redeemable noncontrolling interests of $100,000,000, $8,165,000 of cash dividend payments, cash dividends paid to redeemable noncontrolling interests of $2,923,000, $1,037,000 of share repurchases, and redemption of promissory notes of $466,000, offset by the proceeds from borrowing under the line of credit agreement of $48,000,000 and net contribution from noncontrolling interests of $864,000.

Cash Flows for the Six Months Ended June 30, 2023

Net cash provided by operating activities for the six months ended June 30, 2023 was approximately $5,944,000, which consisted primarily of cash received from net premiums written, and reinsurance recoveries of approximately $141,630,000 less cash disbursed for operating expenses, losses and loss adjustment expenses and interest payments. Net cash provided by investing activities of $59,675,000 was primarily due to the proceeds from calls, repayments and maturities of fixed-maturity securities of $258,207,000, the proceeds from sales of real estate investments of $21,746,000, the proceeds from sales of fixed-maturity and equity securities of $18,360,000, and distributions received from limited partnership investments of $2,596,000, offset by the purchases of fixed-maturity and equity securities of $237,811,000, purchases of property and equipment of $2,762,000, and purchases of real estate investments of $744,000. Net cash used in financing activities totaled $6,402,000, which was primarily due to the redemption of long-term debt of $6,895,000, $6,869,000 of cash dividend payments, cash dividends paid to redeemable noncontrolling interest of $3,012,000, $784,000 of share repurchases, and repayments of long-term debt of $328,000, offset by the proceeds from issuance of long-term debt of $12,000,000.

Investments

The main objective of our investment policy is to maximize our after-tax investment income with a reasonable level of risk given the current financial market. Our excess cash is invested primarily in money market accounts, certificates of deposit, and fixed-maturity and equity securities.

At June 30, 2024, we had $694,128,000 of fixed-maturity and equity investments, which are carried at fair value. Changes in the general interest rate environment affect the returns available on new fixed-maturity investments. While a rising interest rate environment enhances the returns available on new investments, it reduces the market value of existing fixed-maturity investments and thus the availability of gains on disposition. A decline in interest rates reduces the returns available on new fixed-maturity investments but increases the market value of existing fixed-maturity investments, creating the opportunity for realized investment gains on disposition.

In the future, we may alter our investment policy with regard to investments in federal, state and municipal obligations, preferred and common equity securities and real estate mortgages, as permitted by applicable law, including insurance regulations.

OFF-BALANCE SHEET ARRANGEMENTS

As of June 30, 2024, we had unexpired capital commitments for limited partnerships in which we hold interests. Such commitments are not recognized in the consolidated financial statements but are required to be disclosed in the notes to the consolidated financial statements. See Note 21 -- “Commitments and Contingencies” to our unaudited consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for additional information.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these consolidated financial statements requires us to make estimates and judgments to develop amounts reflected and disclosed in our consolidated financial statements. Material estimates that are particularly susceptible to significant change in the near term are related to our losses and loss adjustment expenses, which include amounts estimated for claims incurred but not yet reported. We base our estimates on various assumptions and actuarial data we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates.

We believe our accounting policies specific to losses and loss adjustment expenses, reinsurance recoverable, reinsurance with retrospective provisions, deferred income taxes, stock-based compensation expense, limited partnership investments, acquired intangible assets, warrants, and redeemable noncontrolling interest involve our most significant judgments and estimates material to our consolidated financial statements.

Reserves for Losses and Loss Adjustment Expenses

Our liability for losses and loss adjustment expense (“Reserves”) is specific to property insurance, which is our insurance subsidiaries’ only line of business. The Reserves include both case reserves on reported claims and our reserves for incurred but not reported (“IBNR”) losses. At each period end date, the balance of our Reserves is based on our best estimate of the ultimate cost of each claim for those known cases and the IBNR loss reserves are estimated based primarily on our historical experience. Changes in the estimated liability are charged or credited to operations as the losses and loss adjustment expenses are adjusted.

The IBNR represents our estimate of the ultimate cost of all claims that have occurred but have not been reported to us, and in some cases may not yet be known to the insured, and future development of reported claims. Estimating the IBNR component of our Reserves involves considerable judgment on the part of management. At June 30, 2024, $505,775,000 of the total $571,646,000 we have reserved for losses and loss adjustment expenses is attributable to our estimate of IBNR. The remaining $65,871,000 relates to known cases which have been reported but not yet fully settled in which case we have established a reserve based on currently available information and our best estimate of the cost to settle each claim.

At June 30, 2024, $56,563,000 of the $65,871,000 in reserves for known cases relates to claims incurred during prior years.

Our Reserves decreased from $585,073,000 at December 31, 2023 to $571,646,000 at June 30, 2024. The $13,427,000 decrease is comprised of reductions in our catastrophe Reserves of $51,142,000 primarily specific to Hurricane Ian and Hurricane Irma, and reductions in our non-catastrophe Reserves of $35,864,000 for 2023 and $30,288,000 for 2022 and prior loss years, offset by $103,867,000 in reserves established for the 2024 loss year. The Reserves established for 2024 claims are primarily driven by an allowance for those claims that have been incurred but not reported to the company as of June 30, 2024. The decrease of $117,294,000 specific to our 2023 and prior loss-years reserves is due to settlement of claims related to those loss years.

Based on all information known to us, we consider our Reserves at June 30, 2024 to be adequate to cover our claims for losses that have occurred as of that date including losses yet to be reported to us. However, these estimates are continually reviewed by management as they are subject to significant variability and may be impacted by trends in claim severity and frequency or unusual exposures that have not yet been identified. As part of the process, we review historical data and consider various factors, including known and anticipated regulatory and legal developments, changes in social attitudes, inflation and economic conditions. As experience develops and other data becomes available, these estimates are revised, as required, resulting in increases or decreases to the existing unpaid losses and loss adjustment expenses. Adjustments are reflected in the results of operations in the period in which they are made, and the liabilities may deviate substantially from prior estimates.

Economic Impact of Reinsurance Contracts with Retrospective Provisions

From time to time, our reinsurance contracts may include retrospective provisions that adjust premiums in the event losses are minimal or zero. In accordance with accounting principles generally accepted in the United States of America, we will recognize an asset in the period in which the absence of loss experience obligates the reinsurer to pay cash or other consideration under the contract. In the event that a loss arises, we will derecognize such asset in the period in which a loss arises. Such adjustments to the asset, which accrue throughout the contract term, will negatively impact our operating results when a catastrophic loss event occurs during the contract term.

For the three months ended June 30, 2024 and 2023, we accrued benefits of $6,993,000 in each of the respective periods. For the six months ended June 30, 2024 and 2023, we accrued benefits totaling $13,986,000 in each respective period. The accrual of benefits was recognized as a reduction in ceded premiums.

As of June 30, 2024, we had $58,275,000 of accrued benefits, the amount that would be charged to earnings in the event we experience a catastrophic loss that exceeds the coverage limit provided under such agreements.

We believe the credit risk associated with the collectability of these accrued benefits is minimal based on available information about the reinsurer’s financial position and the reinsurer’s demonstrated ability to comply with contract terms.

The above and other accounting estimates and their related risks that we consider to be our critical accounting estimates are more fully described in our Annual Report on Form 10-K, which we filed with the SEC on March 8, 2024. For the six months ended June 30, 2024, there have been no other material changes with respect to any of our critical accounting policies.

RECENT ACCOUNTING PRONOUNCEMENTS

None.

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our investment portfolio at June 30, 2024 included fixed-maturity and equity securities, the purposes of which are not for speculation. Our main objective is to maximize after-tax investment income and maintain sufficient liquidity to meet our obligations while minimizing market risk, which is the potential economic loss from adverse fluctuations in securities prices. We consider many factors including credit ratings, investment concentrations, regulatory requirements, anticipated fluctuation of interest rates, durations and market conditions in developing investment strategies. Our investment securities are managed primarily by outside investment advisors and are overseen by the investment committee appointed by our Board of Directors. From time to time, our investment committee may decide to invest in low-risk assets such as U.S. government bonds.

Our investment portfolio is exposed to interest rate risk, credit risk and equity price risk. Fiscal and economic uncertainties caused by any government action or inaction may exacerbate these risks and potentially have adverse impacts on the value of our investment portfolio.

We classify our fixed-maturity securities as available-for-sale and report any unrealized gains or losses, net of deferred income taxes, as a component of other comprehensive income within our stockholders’ equity. As such, any material temporary changes in their fair value can adversely impact the carrying value of our stockholders’ equity. In addition, we recognize any unrealized gains or losses related to our equity securities in our statement of income. As a result, our results of operations can be materially affected by the volatility in the equity market.

Interest Rate Risk

Our fixed-maturity securities are sensitive to potential losses resulting from unfavorable changes in interest rates. We manage the risk by analyzing anticipated movement in interest rates and considering our future capital needs.

The following table illustrates the impact of hypothetical changes in interest rates to the fair value of our fixed-maturity securities at June 30, 2024 (amounts in thousands):


Hypothetical Change in Interest Rates	Estimated Fair Value		Change in Estimated Fair Value			Percentage Increase (Decrease) in Estimated Fair Value
300 basis point increase	$	619,318	$	(20,924	)		-3.27	%
200 basis point increase		626,292		(13,950	)		-2.18	%
100 basis point increase		633,267		(6,975	)		-1.09	%
100 basis point decrease		647,219		6,977			1.09	%
200 basis point decrease		654,196		13,954			2.18	%
300 basis point decrease		661,173		20,931			3.27	%

Credit Risk

Credit risk can expose us to potential losses arising principally from adverse changes in the financial condition of the issuers of our fixed-maturity securities. We mitigate the risk by investing in fixed-maturity securities that are generally investment grade, by diversifying our investment portfolio to avoid concentrations in any single issuer or business sector, and by continually monitoring each individual security for declines in credit quality. While we emphasize credit quality in our investment selection process, significant downturns in the markets or general economy may impact the credit quality of our portfolio.

The following table presents the composition of our fixed-maturity securities, by rating, at June 30, 2024 (amounts in thousands):


	Cost or		% of Total				% of Total
	Amortized		Amortized		Estimated		Estimated
Comparable Rating	Cost		Cost		Fair Value		Fair Value
AAA	$	79,955		13	$	79,953		13
AA+, AA, AA-		534,778		83		532,037		83
A+, A, A-		14,584		2		14,267		2
BBB+, BBB, BBB-		12,577		2		12,375		2
BB+, BB, BB-		—		—		—		—
CCC+, CC and C		—		—		—		—
D and Not Rated		1,998		—		1,610		—
Total	$	643,892	$	100	$	640,242	$	100

Equity Price Risk

Our equity investment portfolio at June 30, 2024 included common stocks, perpetual preferred stocks, mutual funds and exchange-traded funds. We may incur potential losses due to adverse changes in equity security prices. We manage the risk primarily through industry and issuer diversification and asset mix.

The following table illustrates the composition of our equity securities at June 30, 2024 (dollar amounts in thousands):


			% of Total
	Estimated		Estimated
	Fair Value		Fair Value
Stocks by sector:
Financial	$	6,755		13
Consumer		7,693		14
Technology		4,687		9
Other (1)		4,030		7
		23,165		43
Mutual funds and exchange-traded funds by type:
Debt		24,082		45
Equity		6,589		12
Alternative		50		—
		30,721		57
Total	$	53,886		100

(1)

Represents an aggregate of less than 5% sectors.

Foreign Currency Exchange Risk

At June 30, 2024, we did not have any material exposure to foreign currency related risk.

ITEM 4 – CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial and accounting officer), we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, and, based on this evaluation, our chief executive officer and our chief financial officer have concluded that these disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal controls over financial reporting during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, implementation of possible controls and procedures depends on management’s judgment in evaluating their benefits relative to costs.

PART II – OTHER INFORMATION

ITEM 1 – LEGAL PROCEEDINGS

We are a party to claims and legal actions arising routinely in the ordinary course of our business. Although we cannot predict with certainty the ultimate resolution of the claims and lawsuits asserted against us, we do not believe that any currently pending legal proceedings to which we are a party will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

ITEM 1A – RISK FACTORS

There have been no material changes in the risk factors previously disclosed in the section entitled “Risk Factors” in our Form 10-K, which was filed with the SEC on March 8, 2024.

ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

Sales of Unregistered Securities and Use of Proceeds

None.

(b)

Repurchases of Securities

The table below summarizes the number of common shares surrendered by employees to satisfy payroll tax liabilities associated with the vesting of restricted shares (dollar amounts in thousands, except share and per share amounts):


	Total Number of Shares		Average Price Paid		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Dollar Value of Shares That May Yet Be Purchased Under The Plans
For the Month Ended	Purchased		Per Share		or Programs		or Programs
April 30, 2024		—	$	—		—	$	—
May 31, 2024		4,445	$	102.33		—	$	—
June 30, 2024		277	$	91.54		—	$	—
		4,722	$	101.70		—

Working Capital Restrictions and Other Limitations on the Payment of Dividends

We are not subject to working capital restrictions or other limitations on the payment of dividends. Our insurance subsidiaries, however, are subject to restrictions on the dividends they may pay. Those restrictions could impact HCI’s ability to pay future dividends.

Under Florida law, a domestic insurer may not pay any dividend or distribute cash or other property to its stockholders except out of that part of its available and accumulated capital and surplus funds which is derived from realized net operating profits on its business and net realized capital gains. Additionally, a Florida domestic insurer may not make dividend payments or distributions to its stockholders without prior approval of the Florida Office of Insurance Regulation (“FLOIR”) if the dividend or distribution would exceed the larger of (1) the lesser of (a) 10.0% of its capital surplus or (b) net income, not including realized capital gains, plus a two year carry forward, (2) 10.0% of capital surplus with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains or (3) the lesser of (a) 10.0% of capital surplus or (b) net investment income plus a three year carry forward with dividends payable constrained to unassigned funds minus 25% of unrealized capital gains.

Alternatively, a Florida domestic insurer may pay a dividend or distribution without the prior written approval of the FLOIR if (1) the dividend is equal to or less than the greater of (a) 10.0% of the insurer’s capital surplus as regards to policyholders derived from realized net operating profits on its business and net realized capital gains or (b) the insurer’s entire net operating profits and realized net capital gains derived during the immediately preceding calendar year, (2) the insurer will have policy holder capital surplus equal to or exceeding 115.0% of the minimum required statutory capital surplus after the dividend or distribution, (3) the insurer files a notice of the dividend or distribution with the FLOIR at least ten business days prior to the dividend payment or distribution and (4) the notice includes a certification by an officer of the insurer attesting that, after the payment of the dividend or distribution, the insurer will have at least 115% of required statutory capital surplus as to policyholders. Except as provided above, a Florida domiciled insurer may only pay a dividend or make a distribution (1) subject to prior approval by the FLOIR or (2) 30 days after the FLOIR has received notice of such dividend or distribution and has not disapproved it within such time.

During the six months ended June 30, 2024, our insurance subsidiaries paid dividends of $11,000,000 to HCI.

ITEM 3 – DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 – MINE SAFETY DISCLOSURES

None.

ITEM 5 – OTHER INFORMATION The following documents are filed as part of this report:

None.

ITEM 6 – EXHIBITS


EXHIBIT
NUMBER		DESCRIPTION

3.1		Articles of Incorporation, with amendments. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed August 7, 2013.

3.1.1		Articles of Amendment to Articles of Incorporation designating the rights, preferences and limitations of Series B Junior Participating Preferred Stock. Incorporated by reference to Exhibit 3.1 to our Form 8-K filed October 18, 2013.

3.1.2		Articles of Amendment to Articles of Incorporation cancelling the rights, preferences and limitations of Series B Junior Participating Preferred Stock. Incorporated by reference to Exhibit 3.1 to our Form 8-K filed May 15, 2020.

3.2		Bylaws, with amendments. Incorporated by reference to the correspondingly numbered exhibit to our Form 8-K filed September 13, 2019.

4.1		Form of common stock certificate. Incorporated by reference to the correspondingly numbered exhibit to our Form 10-Q filed November 7, 2013.

4.2		Common Stock Purchase Warrant, dated February 26, 2021, issued by HCI Group, Inc. to CB Snowbird Holdings, L.P. Incorporated by reference to Exhibit 4.1 of our Form 8-K filed March 1, 2021.

4.3		Indenture, dated May 23, 2022, by and between HCI Group, Inc. and The Bank of New York Mellon Trust Company, N.A. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2022.

4.6		Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934, as amended. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 12, 2021.

4.9		See Exhibits 3.1, 3.1.1, 3.1.2 and 3.2 of this report for provisions of the Articles of Incorporation, as amended, and our Bylaws, as amended, defining certain rights of security holders.

4.10		Indenture, dated March 3, 2017, between HCI Group, Inc. and The Bank of New York Mellon Trust Company, N.A. Incorporated by reference to Exhibit 4.1 of our Form 8-K filed March 3, 2017.

4.11		Form of Global 4.25% Convertible Senior Note due 2037 (included in Exhibit 4.1). Incorporated by reference to Exhibit 4.1 of our Form 8-K filed March 3, 2017.

10.1		Preferred Stock Purchase Agreement, dated February 26, 2021, among TypTap Insurance Group, Inc., HCI Group, Inc., and CB Snowbird Holdings, L.P. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.

10.2		Amended and Restated Articles of Incorporation of TypTap Insurance Group, Inc. filed February 26, 2021. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.

10.3		Shareholders Agreement, dated February 26, 2021, among TypTap Insurance Group, Inc., CB Snowbird Holdings, L.P., HCI Group, Inc., and the other shareholders party thereto. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.


10.4		Parent Guaranty Agreement, dated February 26, 2021, between HCI Group, Inc. and CB Snowbird Holdings, L.P. Incorporated by reference to the corresponding numbered exhibit to our Form 8-K filed March 1, 2021.

10.5**		HCI Group, Inc. 2012 Omnibus Incentive Plan as revised April 26, 2022. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed May 6, 2022.

10.7**		Executive Employment Agreement dated November 23, 2016 between Mark Harmsworth and HCI Group, Inc. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 3, 2017.

10.8		Reimbursement Contract effective June 1, 2024 between Homeowners Choice Property & Casualty Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund.

10.9		Reimbursement Contract effective June 1, 2024 between TypTap Insurance Company and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund.

10.10		Underlying Second Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.11		Second Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2024 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.12		Third Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.13		Third Layer Reinstatement Premium Protection Reinsurance Contract effective June 1, 2024 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.14		County Weighted Industry Loss Reinsurance Contract effective July 9, 2024 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.15		Panhandle Named Storm Property Catastrophe Excess of Loss Reinsurance Contract effective July 1, 2024 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.16		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.17		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2024 issued to Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).


10.18		Layer 3B Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.19		Layer 3B Reinstatement Premium Protection Reinsurance Contract effective June 1, 2024 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.20		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.21		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2024 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.22		First and Second Layer Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.23		Layer 3C Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2024 issued to TypTap Insurance Company and Homeowners Choice Property & Casualty Insurance Company, Inc. by subscribing reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv).

10.25		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.26		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.27		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.28		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.29		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.


10.30		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.31		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2023 issued to TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.32		Reinstatement Premium Protection Reinsurance Contract effective June 1, 2023 issued to TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.33		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.34		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company and TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.35		Property Catastrophe Excess of Loss Reinsurance Contract effective June 1, 2023 issued to Homeowners Choice Property & Casualty Insurance Company and TypTap Insurance Company by Subscribing Reinsurers. Portions of this exhibit have been omitted pursuant to Regulation S-K Item 601(b)(10)(iv). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.36		Reimbursement Contract effective June 1, 2023 between Homeowners Choice Property & Casualty Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.37		Reimbursement Contract effective June 1, 2023 between TypTap Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Florida Hurricane Catastrophe Fund. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.38		RAP Reimbursement Contract effective June 1, 2023 between Homeowners Choice Property & Casualty Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Reinsurance to Assist Policyholders Program (“RAP Program”). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.39		RAP Reimbursement Contract effective June 1, 2023 between TypTap Insurance Company, Inc. and the State Board of Administration of the State of Florida which administers the Reinsurance to Assist Policyholders Program (“RAP Program”). Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.


10.40		Equity Distribution Agreement between HCI Group, Inc., Truist Securities, Inc. and Citizens JMP Securities, LLC. Incorporated by reference to Exhibit 1.2 of our Form S-3 filed January 22, 2024.

10.41		Amended and Restated Common Stock Purchase Warrant between HCI Group, Inc. and CB Snowbird Holdings, L.P. Incorporated by reference to Exhibit 4.17 of our Form S-3 filed January 22, 2024.

10.42		Registration Rights Agreement between HCI Group, Inc. and CB Snowbird Holdings, L.P. Incorporated by reference to Exhibit 4.18 of our Form S-3 filed January 22, 2024.

10.43		Stock Redemption Agreement between TypTap Insurance Group, Inc. and CB Snowbird Holdings, L.P. Incorporated by reference to Exhibit 4.19 of our Form S-3 filed January 22, 2024.

10.44		Assumption Agreement between Homeowners Choice Property & Casualty Insurance Company, Inc. and Citizens Property Insurance Corporation. Incorporated by reference to Exhibit 99.1 of our Form 8-K filed October 2, 2023.

10.45		Assumption Agreement between TypTap Insurance Company and Citizens Property Insurance Corporation. Incorporated by reference to Exhibit 99.1 of our Form 8-K filed November 6, 2023.

10.48**		TypTap Insurance Group, Inc. 2021 Equity Incentive Plan. Incorporated by reference to Exhibit 10.5 of our Form 8-K filed March 1, 2021.

10.49**		Form of Restricted Stock Award Agreement of TypTap Insurance Group, Inc. Incorporated by reference to Exhibit 10.6 of our Form 8-K filed March 1, 2021.

10.51**		Stock Option Agreement between Paresh Patel and TypTap Insurance Group, Inc. dated October 1, 2021. Incorporated by reference to Exhibit 99.1 to our Form 8-K filed October 7, 2021.

10.52**		TypTap Insurance Group, Inc. 2021 Omnibus Incentive Plan. Incorporated by reference to Exhibit 99.2 of our Form 8-K filed October 7, 2021.

10.53		Purchase Agreement, dated May 18, 2022, by and among HCI Group, Inc., JMP Securities LLC and Truist Securities, Inc., as representatives of the several purchasers named therein. Incorporated by reference to Exhibit 10.1 of our Form 8-K filed May 23, 2022.

10.54**		Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated September 15, 2023.

10.57**		Form of executive restricted stock award contract. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed May 1, 2014.

10.58		Purchase Agreement, dated February 28, 2017, by and between HCI Group, Inc. and JMP Securities LLC and SunTrust Robinson Humphrey, Inc., as representatives of the several initial purchasers named therein. Incorporated by reference to Exhibit 10.1 of our Form 8-K filed February 28, 2017.

10.62		Amended and Restated Credit Agreement, dated June 2, 2023, between HCI Group, Inc. and Fifth Third Bank. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2023.

10.63		Security and Pledge Agreement and Revolving Credit Promissory Note, dated June 2, 2023, between HCI Group, Inc. and Fifth Third Bank. Incorporated by reference to Exhibits 99.2, and 99.3 to our Form 8-K filed June 8, 2023.

10.64		Second Amended and Restated Credit Agreement, Second Amended and Restated Security and Pledge Agreement, and Renewed, Amended and Restated Revolving Credit Promissory Note, dated November 3, 2023, between HCI Group, Inc. and Fifth Third Bank. Incorporated by reference to Exhibits 99.1, 99.2, and 99.3 to our Form 8-K filed November 9, 2023.


10.65		Underwriting Agreement, dated December 6, 2023, by and between HCI Group, Inc. and Citizens JMP Securities, LLC. Incorporated by reference to Exhibit 1.1 to our Form 8-K filed December 7, 2023.

10.66**		Executive Employment Agreement between Paresh Patel and HCI Group, Inc. dated April 17, 2024. Incorporated by reference to Exhibit 99.1 to our Form 8-K filed April 23, 2024.

10.67**		Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated April 17, 2024. Incorporated by reference to Exhibit 99.2 to our Form 8-K filed April 23, 2024.

10.105**		Restricted Stock Award Contract between Paresh Patel and HCI Group, Inc. dated January 16, 2020. Incorporated by reference to Exhibit 99.1 to our Form 8-K filed January 23, 2020.

10.106**		Nonqualified Stock Option Agreement between Paresh Patel and HCI Group, Inc. dated January 16, 2020. Incorporated by reference to Exhibit 99.2 to our Form 8-K filed January 23, 2020.

10.124		Property Quota Share Reinsurance Contract effective December 31, 2020 issued to United Property and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.125		Renewal Rights Agreement effective January 18, 2021 by and among United Property and Casualty Insurance Company, United Insurance Holdings Corp., United Insurance Management, L.C. and Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.126		Property Quota Share Reinsurance Contract effective June 1, 2021 issued to United Property and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company and TypTap Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.127		Renewal Rights Agreement effective December 30, 2021 by and among United Property and Casualty Insurance Company, United Insurance Holdings Corp., United Insurance Management, L.C. and Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.128		Property Quota Share Reinsurance Contract effective December 31, 2021 issued to United Property and Casualty Insurance Company by Homeowners Choice Property & Casualty Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-K filed March 10, 2022.

10.129		Property Quota Share Reinsurance Contract effective June 1, 2022 issued to United Property and Casualty Insurance Company by TypTap Insurance Company. Incorporated by reference to the corresponding numbered exhibit to our Form 10-Q filed August 9, 2022.

31.1		Certification of the Chief Executive Officer

31.2		Certification of the Chief Financial Officer

32.1		Written Statement of the Chief Executive Officer Pursuant to 18 U.S.C.ss.1350

32.2		Written Statement of the Chief Financial Officer Pursuant to 18 U.S.C.ss.1350

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)



**		Management contract or compensatory plan.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, who have signed this report on behalf of the Company.


	HCI GROUP, INC.

August 9, 2024	By:	/s/ Paresh Patel
		Paresh Patel
		Chief Executive Officer
		(Principal Executive Officer)

August 9, 2024	By:	/s/ James Mark Harmsworth
		James Mark Harmsworth
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

A signed original of this document has been provided to HCI Group, Inc. and will be retained by HCI Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-10.8 2 hci-ex10_8.htm EX-10.8 EX-10.8

     

    STATE BOARD OF ADMINISTRATION 
OF FLORIDA
1801 HERMITAGE BOULEVARD, SUITE 100
 TALLAHASSEE, FLORIDA 32308
                                             (850) 488-4406
           POST OFFICE BOX 13300
                                              32317-3300
REIMBURSEMENT CONTRACT
Coverage Effective: June 1, 2024 
("Contract")

    RON DESANTIS 
GOVERNOR 
CHAIR
JIMMY PATRONIS 
CHIEF FINANCIAL OFFICER
ASHLEY MOODY 
ATTORNEY GENERAL
LAMAR TAYLOR
INTERIM-EXECUTIVE DIRECTOR & 
CHIEF INVESTMENT OFFICER

   

EXHIBIT 10.8

This Contract is between:

Homeowners Choice Property and Casualty Insurance Company

("Company")
NAIC # 12944
and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA ("SBA")

WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND ("FHCF")

PREAMBLE

Section 215.555, Florida Statutes, creates the FHCF and directs the SBA to administer the FHCF. This Contract, consisting of the principal document entitled Reimbursement Contract, addressing the mandatory FHCF coverage, and Appendix A, is subject to Section 215.555, Florida Statutes, and to any administrative rule adopted pursuant thereto, and is not intended to be in conflict therewith.

In consideration of the promises set forth in this Contract, the parties agree as follows:

ARTICLE I - SCOPE OF AGREEMENT

As a condition precedent to the SBA's obligations under this Contract, the Company shall report to the SBA in a specified format the business it writes which is described in this Contract as Covered Policies. The terms of this Contract 1shall determine the rights and obligations of the parties. This Contract provides reimbursement to the Company under certain circumstances, as described herein, and does not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies, which were in force and in effect at the time of the Covered Event causing the Loss, in excess of the Company's Retention as a result of each Covered Event commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.

ARTICLE II - PARTIES TO THE CONTRACT

This Contract is solely between the Company, an Authorized Insurer or any entity writing Covered Policies under Section 627.351, Florida Statutes, in the State of Florida, and the SBA. In no instance shall any insured of the Company, any claimant against an insured of the Company, or any other third party have any rights under this Contract, except as provided in Article XVI. The SBA will disburse funds only to the Company, except as provided for in Article XVI. The Company shall not, without the prior approval of the Florida Office of Insurance Regulation, sell, assign, or transfer to any third party, in return for a fee or other consideration any sums the FHCF pays under this Contract or the right to receive such sums.

ARTICLE III - TERM; EXECUTION

(1)

Term

This Contract applies to Losses from Covered Events which commence during the period from

12:00:01 a.m., Eastern Time, June 1, 2024, to 12:00 midnight, Eastern Time, May 31, 2025 (the "Contract Year"). The SBA shall not be liable for Losses from Covered Events which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Covered Event is in progress, the SBA shall be responsible for such Covered Event in progress in the same manner and to the same extent it would have been responsible had the Contract expired the day following the conclusion of the Covered Event in progress.

(2)

Mandatory Nature of this Contract

(a) Statutory Requirement

This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code (F.A.C.), in

fulfillment of the statutory requirement that the SBA enter into a Contract with each Company writing Covered Policies in Florida. Under Section 215.555(4)(a), Florida Statutes, the SBA must enter into such a Contract with each such Company, and each such Company must enter into the Contract as a condition of doing business in Florida. Under Section 215.555(16)(c), Florida Statutes, Companies writing Covered Policies must execute the Contract by March 1 of the immediately preceding Contract Year.

(b) Duty to Provide a Fully and Timely Executed Copy of this Contract to the FHCF

Administrator

The Company must provide a fully executed copy of this Contract in electronic form to the

Administrator no later than the March 1 statutory deadline for execution, or, in the case of a New Participant, no later than 30 days after the New Participant began writing Covered Policies.

(3)

Contract Deemed Executed Notwithstanding Execution Errors

Except with respect to New Participants, this Contract is deemed to have been executed by the Company as of the March 1 statutory deadline, notwithstanding the fact that the Coverage Level election in Article XXI(1)(b) may be invalid, and notwithstanding the fact that the person purporting to execute the Contract on the part of the Company may have lacked the requisite authority. With respect to New Participants, this Contract is deemed to have been executed by the New Participant as of the date on which the New Participant began writing Covered Policies; coverage shall be determined as provided in paragraphs (c) and (d). Execution of this Contract by or on behalf of an entity that does not write Covered Policies is void. If the Company failed to timely submit an executed copy of this Contract, or if the executed Contract includes an invalid Coverage Level election under Article XXI, the Company's Coverage Level shall be deemed as follows:

(a)

For a Company that is a member of a National Association of Insurance Commissioners (NAIC) group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed. If executed Contracts for none of the members of an NAIC group have been received by the FHCF Administrator, the Coverage Level from the prior Contract Year shall be deemed.

(b)

For a Company that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the Coverage Level from the prior Contract Year shall be deemed.

(c)

For a New Participant that is a member of an NAIC group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed.

(d)

For a New Participant that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the 45 percent, 75 percent, or 90 percent Coverage Levels may be selected if the FHCF Administrator receives executed Contracts within 30 calendar days after the effective date of the first Covered Policy, otherwise, the 45 percent Coverage Level shall be deemed to have been selected.

ARTICLE IV - LIABILITY OF THE FHCF

(1)

The SBA shall reimburse the Company with respect to each Covered Event commencing during the Contract Year in the amount of Ultimate Net Loss paid by the Company in excess of the Company's Retention, as adjusted pursuant to the definition of Retention in Article V, multiplied by the applicable Coverage Level, plus 10 percent of the reimbursed Losses as a Loss Adjustment Expense Allowance, the total of which shall not exceed the Company's Limit.

(2)

Section 215.555(4)(c)1., Florida Statutes, provides that the obligation of the FHCF with respect to all Contracts covering a particular Contract Year shall not exceed the Actual Claims-Paying Capacity of the FHCF up to a specified dollar limit.

(3)

In order to assure that reimbursements do not exceed the statutory limit on the obligation of the FHCF provided in Section 215.555(4)(c)1., Florida Statutes, the SBA shall, upon the occurrence of a Covered Event, evaluate the potential Losses to the FHCF and the FHCF's capacity at the time of the event. The initial Projected Payout Multiple used to reimburse the Company for its Losses shall not exceed the Projected Payout Multiple as calculated based on the capacity needed to provide the FHCF's coverage. If it appears that the Estimated Claims-Paying Capacity may be exceeded, the SBA shall reduce the projected payout factors or multiples for determining each participating insurer's projected payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity.

(4)

Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. Once the Company's Limit has been exhausted, the Company will not be entitled to further reimbursements.

ARTICLE V - DEFINITIONS

As used in this Contract, the following words and phrases are defined to mean:

(1)

Actual Claims-Paying Capacity of the FHCF

This term means the sum of the Balance of the Fund as of December 31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the amount the SBA is able to raise through the issuance of revenue bonds under Section 215.555(6), Florida Statutes.

(2)

Actuarially Indicated

This term means an amount determined according to principles of actuarial science to be adequate, but not excessive, in the aggregate, to pay current and future obligations and expenses of the fund, including additional amounts if needed to pay debt service on revenue bonds and to provide required debt service coverage in excess of the amounts required to pay actual debt service on revenue bonds, and determined according to principles of actuarial science to reflect each insurer's relative exposure to hurricane losses.

(3)

Additional Living Expense (ALE)

ALE Losses covered by the FHCF are not to exceed 40 percent of the insured value of a Residential Structure or its contents based on how the coverage is provided in the policy. Fair rental value, loss of rents, or business interruption losses are not covered by the FHCF.

(4)

Administrator

This term means the entity with which the SBA contracts to perform administrative tasks associated with the operations of the FHCF. The current Administrator is Paragon Strategic Solutions Inc.

(5)

Authorized Insurer

This term is defined in Section 624.09(1), Florida Statutes.

(6)

Balance of the Fund as of December 31 or Fund Balance

This term means the amount of assets available to pay claims resulting from Covered Events which occurred during the Contract Year, not including any pre-event or post-event bonds, reinsurance, or proceeds from other financing mechanisms.

(7)

Borrowing Capacity

This term means the amount of funds which are able to be raised by the issuance of revenue bonds or through other financing mechanisms, less bond issuance expenses and reserves.

(8)

Citizens Property Insurance Corporation (Citizens)

This term means Citizens Property Insurance Corporation as created under Section 627.351(6), Florida Statutes. For the purposes of the FHCF, Citizens incorporates two accounts, (a) the coastal account and (b) the personal lines and commercial lines accounts. Each account is treated by the FHCF as if it were a separate participating insurer with its own reportable exposures, Reimbursement Premium, Retention, and Ultimate Net Loss.

(9)

Commutation

This term means the estimation, payment, and complete discharge of all future obligations for Losses, regardless of future loss development. The final Commutation shall constitute a complete and final release of all obligations of the SBA with respect to Losses. Commutation may be per Covered Event or by Contract Year as determined by the FHCF.

(10)

Covered Event

This term means any one storm declared to be a hurricane by the National Hurricane Center which causes insured losses in Florida. A Covered Event begins when a hurricane causes damage in Florida while it is a hurricane and continues throughout any subsequent downgrades in storm status by the National Hurricane Center regardless of whether the hurricane makes landfall. Any storm, including a tropical storm, which does not become a hurricane is not a Covered Event.

(11)

Coverage Level

This term means the level of reimbursement (90 percent, 75 percent, or 45 percent), as elected by the Company under Article XXI or deemed under Article III(3), which is used in determining reimbursement under Article IV.

(12)

Covered Policy

(a)

Covered Policy, as defined in Section 215.555(2)(c), Florida Statutes, is further clarified to mean only that portion of a binder, policy or contract of insurance that insures real or personal property located in the State of Florida to the extent such policy insures a Residential Structure or the contents of a Residential Structure, located in the State of Florida.

(b)

Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower's and the lender's financial interest, in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner's policy,

the coverage amount that the homeowner has been notified of by the collateral protection insurer, or

the coverage amount that the homeowner requests from the collateral protection insurer,

if such collateral protection insurance policy can be accurately reported as required in Section 215.555(5), Florida Statutes.

(c)

A Company will be deemed to be able to accurately report data if the company submits the required data as specified in the Data Call adopted under Rule 19-8.029, F.A.C.

(d)

Covered Policy does not include any policy or exposure excluded under Article VI.

(13)

Deductible Buy-Back Policy

This term means a specific policy that provides coverage to a policyholder for some portion of the

policyholder's deductible under a policy issued by another insurer.

(14)

Estimated Claims-Paying Capacity of the FHCF

This term means the sum of the projected Balance of the Fund as of December 31 of a Contract Year, plus any reinsurance purchased by the FHCF, plus the most recent estimate of the Borrowing Capacity of the FHCF, determined pursuant to Section 215.555(4)(c), Florida Statutes.

(15)

Excess Policy

This term means, for the purposes of this Contract, a policy that provides insurance protection for large commercial property risks and that provides a layer of coverage above a primary layer (which is insured by a different insurer) that acts much the same as a very large deductible.

(16)

Insurer Group

For purposes of the Coverage Level election in Section 215.555(4)(b), Florida Statutes, Insurer Group means the group designation assigned by the NAIC for regulatory purposes. A Company is a member of a group as designated by the NAIC until such Company is assigned another group designation or is no longer a member of a group.

(17)

Limit

This term means the maximum amount that a Company may recover under this Contract, calculated by multiplying the Company's Reimbursement Premium by the Payout Multiple.

(18)

Loss

This term means an incurred loss under a Covered Policy from a Covered Event, including Additional Living Expenses not to exceed 40 percent of the insured value of a Residential Structure or its contents and amounts paid as fees on behalf of or inuring to the benefit of a policyholder. The term Loss does not include allocated or unallocated loss adjustment expenses or any item for which this Contract does not provide reimbursement pursuant to the exclusions in Article VI.

(19) Loss Adjustment Expense Allowance

(a)

The Loss Adjustment Expense Allowance is equal to 10 percent of the reimbursed Losses under this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.

(b)

The Loss Adjustment Expense Allowance is included in, and not in addition to, the Limit applicable to a Company.

(20) New Participant

This term means a Company that begins writing Covered Policies on or after the beginning of the

Contract Year. A Company that removes Covered Policies from Citizens or an Unsound Insurer pursuant to an assumption agreement effective on or after June 1 and had written no other Covered Policies before June 1 is also considered a New Participant.

(21) Payout Multiple

This term means the multiple as calculated in accordance with Section 215.555(4)(c), Florida Statutes, which is derived by dividing the actual single season Claims-Paying Capacity of the FHCF by the total aggregate industry Reimbursement Premium for the FHCF for the Contract Year billed as of December 31 of the Contract Year. The final Payout Multiple is determined once Reimbursement Premiums have been billed as of December 31 and the amount of bond proceeds has been determined.

(22) Premium Formula

This term means the Formula developed pursuant to Section 215.555(5)(b), Florida Statutes, and

approved by the SBA Trustees for the purpose of determining the Actuarially Indicated Reimbursement Premium to be paid to the FHCF.

(23) Projected Payout Multiple

The Projected Payout Multiple is used to calculate a Company's projected payout pursuant to Section 215.555(4)(d)2., Florida Statutes. The Projected Payout Multiple is derived by dividing the estimated single season Claims-Paying Capacity of the FHCF by the estimated total aggregate industry Reimbursement Premium for the FHCF for the Contract Year. The Company's Reimbursement Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to estimate the Company's coverage from the FHCF for the Contract Year.

(24) Reimbursement Premium or Premium Residential Structures do not include any structures excluded under Article VI.

These terms mean the amount to be paid by the Company, as determined by multiplying each $1,000 of insured value reported by the Company in accordance with Section 215.555(5)(b), Florida Statutes, by the rate as derived from the Premium Formula, as described in Rule 19-8.028, F.A.C.

(25) Residential Structure

In general, this term means a unit or building used exclusively or predominantly for dwelling or

habitational occupancies, including the primary structure and appurtenant structures insured under the same Covered Policy and any other structures covered under endorsements associated with the Covered Policy covering the Residential Structure.

(a)

With respect to a unit or home insured under a personal lines residential policy form, such unit or home is deemed to have a habitational occupancy and to be a Residential Structure regardless of the term of its occupancy.

(b)

With respect to a condominium structure or complex insured under a commercial lines policy, such structure is deemed to have a habitational occupancy and to be a Residential Structure, regardless of the term of occupancy of individual units.

(c)

A single structure which includes a mix of commercial habitational and commercial non-habitational occupancies, and is insured under a commercial lines policy, is considered a Residential Structure if 50 percent or more of the total insured value of the structure is used for habitational occupancies.

(d)

(26) Retention

This term means the amount of Losses from a Covered Event which must be incurred by the Company before it is eligible for reimbursement from the FHCF.

(a)

When the Company incurs Losses from one or two Covered Events during the Contract Year, the Company's full Retention shall be applied to each of the Covered Events.

(b)

When the Company incurs Losses from more than two Covered Events during the Contract Year, the Company's full Retention shall be applied to each of the two Covered Events causing the largest Losses for the Company. For each other Covered Event resulting in Losses, the Company's Retention shall be reduced to one-third of its full Retention.

All reimbursement of Losses for each Covered Event shall be based on the Company's full Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made on or after January 1 of the Contract Year provided the Company reports its Losses as specified in this Contract.

Adjustments to the Company's Retention shall be based upon its paid and outstanding Losses as reported on the Company's Proof of Loss Reports, but shall not include incurred but not reported Losses. The Company's Proof of Loss Reports shall be used to determine which Covered Events constitute the Company's two largest Covered Events. After this initial determination, any subsequent adjustments shall be made quarterly by the SBA only if the Proof of Loss Reports reveal that loss development patterns have resulted in a change in the order of Covered Events entitled to the reduction to one-third of the full Retention.

(c) The Company's full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company's Reimbursement Premium for the Contract Year.

(27) Retention Multiple

(a) The Retention Multiple is applied to the Company's Reimbursement Premium to determine the

Company's Retention. The Retention Multiple for the 2024/2025 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2022/2023 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90 percent Coverage Level for the Contract Year as determined by the SBA.

(b) The Retention Multiple shall be adjusted to reflect the Coverage Level elected by the Company under this Contract as follows:

If the Company elects the 90 percent Coverage Level, the adjusted Retention Multiple is 100 percent of the amount determined under paragraph (a);

If the Company elects the 75 percent Coverage Level, the adjusted Retention Multiple is 120 percent of the amount determined under paragraph (a); or

If the Company elects the 45 percent Coverage Level, the adjusted Retention Multiple is 200 percent of the amount determined under paragraph (a).

(28) Ultimate Net Loss

(a)

This term means all Losses under Covered Policies in force at the time of a Covered Event prior to the application of the Company's Retention and Coverage Level and excluding loss adjustment expense and any exclusions under Article VI.

(b)

In calculating the Company's Ultimate Net Loss, the amounts described in paragraph (a) shall be reduced by the deductibles applicable under the policy to the hurricane loss, without recognition of any credit earned or reduction to the deductible under the policy applied by the Company. The deductibles must first be applied to the portion of the Loss covered by the FHCF.

(c)

Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such Loss to arrive at the amount of liability attaching hereunder.

(d)

All salvages, recoveries or payments recovered or received subsequent to a Loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto.

(e)

The SBA shall be subrogated to the rights of the Company to the extent of its reimbursement of the Company. The Company agrees to assist and cooperate with the SBA in all respects as regards such subrogation. The Company further agrees to undertake such actions as may be necessary to enforce its rights of salvage and subrogation, and its rights, if any, against other insurers as respects any claim, loss, or payment arising out of a Covered Event.

(29) Unsound Insurer

This term means an insurer determined by the Office of Insurance Regulation to be in unsound

condition as defined in Section 624.80(2), Florida Statutes, or an insurer placed in receivership under Chapter 631, Florida Statutes.

ARTICLE VI - EXCLUSIONS

This Contract does not provide reimbursement for:

(1) Any losses not defined as being within the scope of a Covered Policy, including any loss other than a loss under the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.

(2) Any policy which excludes wind or hurricane coverage.

(3) Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined by the FHCF.

(4) (a) Any policy for Residential Structures that provides a layer of coverage underneath an Excess Policy issued by a different insurer;

(b)

Any policy providing a layer of windstorm or hurricane coverage for a structure(s) above or below a layer of windstorm or hurricane coverage under a separate policy issued by a different insurer, or any other circumstance in which two or more insurers provide primary windstorm or hurricane coverage for a structure(s) using separate policy forms;

(c)

Any other policy providing a layer of windstorm or hurricane coverage for a structure(s) below a layer of self-insured windstorm or hurricane coverage for the same structure(s); or

(d)

The exclusions in this subsection do not apply to primary quota share policies written by Citizens Property Insurance Corporation under Section 627.351(6)(c)2., Florida Statutes.

(5) Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income, or business interruption.

(6) Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(12)(b).

(7) Any reinsurance assumed by the Company.

(8) Hotels, motels, timeshares, shelters, camps, retreats, or other similar structures. This exclusion does not apply to any policy identified as covering a residential condominium association or to any policy on which the insured is a residential condominium association, unless it is classified and rated as a hotel, motel, timeshare, shelter, camp, retreat or other similar structure.

(9)

Retail, office, mercantile, or manufacturing facilities, or other similar structures.

(10)

Any exposure for condominium or homeowner associations if no Residential Structures are insured under the policy.

(11)

Commercial healthcare facilities and nursing homes; however, a nursing home which is an integral part of a retirement community consisting primarily of habitational structures that are not nursing homes will not be subject to this exclusion.

(12)

Any exposure under commercial policies covering only appurtenant structures or structures that do not function as a habitational structure (e.g., a policy covering only the pool of an apartment complex).

(13)

Policies covering only Additional Living Expense.

(14)

Any exposure for barns or barns with apartments or living quarters.

(15)

Any exposure for builders risk coverage or new Residential Structures under construction.

(16)

Any exposure for vehicles, recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing.

(17)

Any liability of the Company for extra contractual obligations or liabilities in excess of original policy limits. This exclusion includes, but is not limited to, amounts paid as bad faith awards, punitive damages awards, or other court-imposed fines, sanctions, interest, or penalties; or other amounts in excess of the coverage limits under the Covered Policy.

(18)

Any losses paid in excess of a policy's hurricane limit in force at the time of the Covered Event, including individual coverage limits (i.e., building, appurtenant structures, contents, and additional living expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a discount on or waiver of an applicable deductible. This exclusion includes overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit.

(19)

Any losses paid under a policy for Additional Living Expense, written as a time element coverage, in excess of the Additional Living Expense exposure reported for that policy under the Data Call (unless policy limits have changed effective after June 30 of the Contract Year).

(20)

Any losses which the Company's claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year.

(21)

Any exposure for, or amounts paid to reimburse a policyholder for, condominium association loss assessments or under similar coverages for contractual liabilities.

(22)

Losses in excess of the aggregate limits of liability specified in Article IV and in Section 215.555(4)(c), Florida Statutes.

(23)

Any liability assumed by the Company from Pools, Associations, and Syndicates. Exception: Covered Policies assumed from Citizens under the terms and conditions of an executed assumption agreement between the Company and Citizens are covered by this Contract.

(24)

All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. "Insolvency fund" includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

(25)

Property losses that are proximately caused by any peril other than a Covered Event, including, but not limited to, fire, theft, flood or rising water, or windstorm that does not constitute a Covered Event, or any liability of the Company for loss or damage caused by or resulting from nuclear reaction, nuclear radiation, or radioactive contamination from any cause, whether direct or indirect, proximate or remote, and regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

(26)

Losses from water damage including flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind.

(27)

A policy providing personal property coverage separate from coverage of personal property included in a homeowner's, mobile homeowner's, condominium unit owner's, or tenant's policy or other policy covering a Residential Structure, or in an endorsement to such a policy. Also excluded is a personal property endorsement to a policy that excludes windstorm or hurricane coverage or to any other type of policy that does not meet the definition of covered policy.

(28)

Endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property meeting the following requirements:

(a) An endorsement predominantly covering Specialized Fine Arts Risks and not covering any Residential Structure if it meets the description in subparagraph 1 and if the conditions in subparagraph 2 are met.

1. For purposes of this exemption, a Specialized Fine Arts Risk endorsement is an endorsement that:

Insures works of art, of rarity, or of historic value, such as paintings, works on paper, etchings, art glass windows, pictures, statuary, sculptures, tapestries, antique furniture, antique silver, antique rugs, rare books or manuscripts, jewelry, or other similar items;

Charges a minimum premium of $500; and

Insures scheduled items valued, in the aggregate, at no less than $100,000.

2. The insurer offers specialized loss prevention services or other collector services designed to prevent or minimize loss, or to value or inventory the Specialized Fine Arts for insurance purposes, such as:

Collection risk assessments;

Fire and security loss prevention;

Warehouse inspections to protect items stored off-site;

Assistance with collection inventory management; or

Collection valuation reviews.

(b) An endorsement generally used by the Company to cover personal property which could include property of a collectible nature, including fine arts, as further described in this paragraph, either on a scheduled basis or written under a blanket limit, and not covering anything other than personal property. All such endorsements are subject to the exclusion provided in this paragraph when the endorsement limit equals or exceeds $500,000. Generally, such collectible property has unusually high values due to its investible, artistic, or unique intrinsic nature. The class of property covered under such an endorsement represents an unusually high exposure value and such endorsement is intended to provide coverage for a class or classes of property that is not typical for the contents coverage under residential property insurance policies. In many cases property may be located at various locations either in or outside the state of Florida or the location of the property may change from time to time. The investment nature of such property distinguishes this type of exposure from the typical contents associated with a Covered Policy.

(29) Any losses under liability coverages.

ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES

The Company shall investigate and settle or defend all claims and Losses. All payments of claims or Losses by the Company within the terms and limits of the appropriate coverage parts of Covered Policies shall be binding on the SBA, subject to the terms of this Contract, including the provisions in Article XIV relating to inspection of records and examinations.

ARTICLE VIII - REIMBURSEMENT ADJUSTMENTS

Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess reimbursements which have been paid to the Company along with interest thereon. Excess reimbursements are those payments made to the Company by the SBA that are in excess of the Company's coverage under the Contract Year. Excess reimbursements may result from adjustments to the Projected Payout Multiple or the Payout Multiple, incorrect exposure (Data Call) submissions or resubmissions, incorrect calculation of Reimbursement Premium or Retention, incorrect Proof of Loss Reports, incorrect calculation of reinsurance recoveries, or subsequent readjustment of policyholder claims, including subrogation and salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date for adjustments along with the interest due thereon through the due date. The applicable interest rate for interest charges will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.

ARTICLE IX - REIMBURSEMENT PREMIUM

(1)

The Company shall, in a timely manner, pay the SBA its Reimbursement Premium for the Contract Year. The Reimbursement Premium for the Contract Year shall be calculated in accordance with Section 215.555, Florida Statutes, with any rules promulgated thereunder, and with Article X(2).

(2)

The Company's Reimbursement Premium is based on its June 30 exposure in accordance with Article X, except as provided for New Participants under Article X, and is not adjusted to reflect an increase or decrease in exposure for Covered Policies effective after June 30 nor is the Reimbursement Premium adjusted when the Company cancels policies or is liquidated or otherwise changes its business status (merger, acquisition, or termination) or stops writing new business (continues in business with its policies in a runoff mode). Similarly, new business written after June 30 will not increase or decrease the Company's FHCF Reimbursement Premium or impact its FHCF coverage. FHCF Reimbursement Premiums are required of all Companies based on their writing Covered Policies in Florida as of June 30, and each Company's FHCF coverage as based on the definition in Section 215.555(2)(m), Florida Statutes, shall exist for the entirety of the Contract Year regardless of exposure changes, except as provided for New Participants under Article X.

(3) Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Reimbursement Premium installments. However, if the Company's estimation is less than the provisional Reimbursement Premium billed, an interest charge will accrue on the difference between the estimated Reimbursement Premium and the final Reimbursement Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Reimbursement Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Reimbursement Premium if paid as billed by the FHCF's Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Reimbursement Premium billed but is less than the final Reimbursement Premium, interest will not accrue. If the Reimbursement Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Reimbursement Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Reimbursement Premium which is overpaid as either an estimate or as a provisional Reimbursement Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits and charges will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.

ARTICLE X - REPORTS AND REMITTANCES
(1) Exposures

(a)

If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall report to the SBA, unless otherwise provided in Rule 19-8.029, F.A.C., no later than the statutorily required date of September 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of June 30 of the Contract Year as outlined in the annual reporting of insured values form, FHCF-D1A (Data Call) adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.

(b)

If the Company first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year, the Company shall report to the SBA, no later than February 1 of the Contract Year, by ZIP Code or other limited geographical area as specified by the SBA, its insured values under Covered Policies as of November 30 of the Contract Year as outlined in the Supplemental Instructions for New Participants section of the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C., and other data or information in the format specified by the SBA.

(c)

If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.

(d)

The requirement that a report is due on a certain date means that the report shall be received by the SBA no later than 4 p.m. Eastern Time on the due date. Reports sent to the FHCF Administrator will be returned to the sender. Reports not in the physical possession of the SBA by 4 p.m., Eastern Time, on the applicable due date are late.

(2) Reimbursement Premium

(a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the Contract Year in amounts to be determined by the FHCF. However, if the Company's Reimbursement Premium for the prior Contract Year was less than $5,000, the Company's full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional Reimbursement Premium payment, on or before December 1 of the Contract Year.

(b) If oversight of the Company has been transferred through any legal action to a court appointed receiver (referred to as "receivership"):

The full annual provisional Reimbursement Premium as billed and any outstanding balances will be due and payable no later than on August 1 or the date of receivership of the Contract Year.

Failure by such Company to pay the full annual provisional Reimbursement Premium as

specified in subparagraph 1. by the applicable due date may result in the 45 percent Coverage Level being deemed by the SBA for the complete Contract Year regardless of the level selected for the Company through the execution of this Contract and regardless of whether a Covered Event occurred or triggered coverage. As such, the annual provisional Reimbursement Premium owed by the Company will be adjusted to reflect the 45 percent Coverage Level for the Contract Year.

(c) A New Participant that first begins writing Covered Policies on or after June 1 but prior to December 1 of the Contract Year shall pay the FHCF a provisional Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies. The Administrator shall calculate the Company's actual Reimbursement Premium for the period based on its actual exposure as of November 30 of the Contract Year, as reported on or before February 1 of the Contract Year.

To recognize that New Participants have limited exposure during this period, the actual Reimbursement Premium as determined by processing the Company's exposure data shall then be divided in half, the provisional Reimbursement Premium shall be credited, and the resulting amount shall be the total Reimbursement Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Reimbursement Premium payment is due no later than April 1 of the Contract Year. The Company's Retention and coverage will be determined based on the total Reimbursement Premium due as calculated above.

(d)

A New Participant that first begins writing Covered Policies on or after December 1 through and including May 31 of the Contract Year shall pay the FHCF a Reimbursement Premium of $1,000 no later than 30 days from the date the New Participant began writing Covered Policies.

(e)

The requirement that the Reimbursement Premium is due on a certain date means that the Reimbursement Premium shall be remitted by wire transfer or ACH and shall have been credited to the FHCF's account, as set out on the invoice sent to the Company, on the due date applicable to the particular installment.

(f) Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for Losses attributable to Covered Events occurring in that Contract Year or for Losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past Losses or for debt service on post-event revenue bonds issued pursuant to Section 215.555(6)(a)1., Florida Statutes. Reimbursement Premiums and earnings thereon may be used for payments relating to such revenue bonds in the event emergency assessments are insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on post-event revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used shall be returned, without interest, to the Fund when emergency assessments or other legally available funds remain available after making payment relating to the post-event revenue bonds and any other purposes for which emergency assessments were levied.

(3) Losses

(a) In General

Losses resulting from a Covered Event commencing during the Contract Year shall be reported by the Company and reimbursed by the FHCF as provided herein and in accordance with the Statute, this Contract, and any rules adopted pursuant to the Statute. For a Company participating in a quota share primary insurance agreement(s) with Citizens Property Insurance Corporation Coastal Account, Citizens and the Company shall report only their respective portion of Losses under the quota share primary insurance agreement(s).

Pursuant to Section 215.555(4)(c), Florida Statutes, the SBA is obligated to pay for Losses not to exceed the Actual Claims-Paying Capacity of the FHCF, up to the limit in accordance with Section 215.555(4)(c)1., Florida Statutes, for any one Contract Year.

(b) Loss Reports

At the direction of the SBA, the Company shall report its projected Ultimate Net Loss from each Covered Event to provide information to the SBA in determining any potential liability for possible reimbursable Losses under the Contract on the Interim Loss Report, Form FHCF-L1A, adopted for the Contract Year under Rule 19-8.029, F.A.C. Interim Loss Reports (including subsequent Interim Loss Reports if required by the SBA) will be due in no less than fourteen days from the date of the notice from the SBA that such a report is required.

FHCF reimbursements will be issued based on paid Ultimate Net Loss information reported by the Company on the Proof of Loss Report, Form FHCF-L1B, adopted for the Contract Year under Rule 19-8.029, F.A.C.

To qualify for reimbursement, the Proof of Loss Report must have the electronic signatures of two executive officers authorized by the Company to sign or submit the report.

The Company must also submit a Detailed Claims Listing, Form FHCF-DCL, adopted for the Contract Year under Rule 19-8.029, F.A.C., at the same time it submits its first Proof of Loss Report for a specific Covered Event that qualifies the Company for reimbursement under that Covered Event, and must be prepared to supply a Detailed Claims Listing for any subsequent Proof of Loss Report upon request.

While the Company may submit a Proof of Loss Report requesting reimbursement at any time following a Covered Event, the Company shall submit a mandatory Proof of Loss Report for each Covered Event no later than December 31 of the Contract Year during which the Covered Event occurs using the most current data available, regardless of the amount of Ultimate Net Loss or the amount of reimbursements or advances already received, and shall include a Detailed Claims Listing if requested by the SBA.

Updated Proof of Loss Reports for each Covered Event are due quarterly thereafter until the Commutation process described in Article XI is completed. The Company shall submit its quarterly Proof of Loss Reports with an "as of" date not more than sixty days prior to the applicable quarter-end date, and shall include a Detailed Claims Listing if requested by the SBA.

3. The SBA, except as noted below, will determine and pay, within 30 days or as soon as practicable after receiving Proof of Loss Reports, the reimbursement amount due based on Losses paid by the Company to date and adjustments to this amount based on subsequent quarterly information. The adjustments to reimbursement amounts shall require the SBA to pay, or the Company to return, amounts reflecting the most recent determination of Losses.

The SBA shall have the right to consult with all relevant regulatory agencies to seek all relevant information, and shall consider any other factors deemed relevant, prior to the issuance of reimbursements.

The SBA shall require commercial self-insurance funds established under Section 624.462, Florida Statutes, to submit contractor receipts to support paid Losses reported on a Proof of Loss Report, and the SBA may hire an independent consultant to confirm Losses, prior to the issuance of reimbursements.

The SBA shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements requested by Companies that have been placed in receivership.

4. All Proof of Loss Reports qualifying for reimbursement will be compared with the FHCF's exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and claims examinations to determine the reasonableness of the reported Losses. Except as noted in subparagraph 5., Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company's reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call before the Company's request for reimbursement or advance will be fully processed by the Administrator since the Data Call impacts the Company's Reimbursement Premium, Retention, and coverage for the Contract Year.

In general, the Company's paid Ultimate Net Losses must exceed its full Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(26)(b), Retention adjustments will be made on or after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. Each Company, including entities created pursuant to Section 627.351(6), Florida Statutes, incurring reimbursable Losses will receive the amount of reimbursement due under the individual Company's Contract up to the amount of the Company's payout. If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company's Retention for each Covered Event.

However, the Company's reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company's Reimbursement Premium for the Contract Year.

2. Reserve established. The SBA will establish a reserve for the outstanding reimbursable Losses for the previous Contract Year, based on the length of time the Losses have been outstanding, the amount of Losses already paid, the percentage of incurred Losses still unpaid, and any other factors specific to the loss development of the Covered Events involved.

(4) Advances

(a)

The SBA may make advances for loss reimbursements as defined herein, at market interest rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which allows the Company to continue to pay claims in a timely manner. Advances will be made based on the Company's paid and reported outstanding Losses for Covered Policies (excluding all incurred but not reported Losses) as reported on a Proof of Loss Report, and shall include a Loss Adjustment Expense Allowance as calculated by the FHCF. In order to be eligible for an advance, the Company must submit its exposure data for the Contract Year as required under subsection (1) of this Article. Except as noted below, advances, if approved, will be made as soon as practicable after the SBA receives a written request, signed by two officers of the Company, for an advance of a specific amount and any other information required for the specific type of advance under paragraphs (c) and (d). All reimbursements due to the Company shall be offset against any amount of outstanding advances plus the interest due thereon.

(b)

For advances or excess advances, which are advances that are in excess of the amount to which the Company is entitled, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. All interest charged will commence on the date the SBA issues a disbursement for an advance and will cease on the date upon which the FHCF has received the Company's Proof of Loss Report for the Covered Event for which the Company qualifies for reimbursement. If such reimbursement is less than the amount of outstanding advances issued to the Company, interest will continue to accrue on the outstanding balance of the advances until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advances. Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the FHCF for the overpayment.

(c)

If the Company has an outstanding advance balance as of December 31 of this or any other Contract Year, the Company is required to have an actuary certify outstanding and incurred but not reported Losses as reported on the applicable December Proof of Loss Report.

(d)

The specific type of advances enumerated in Section 215.555, Florida Statutes, follow.

1. Advances to Companies to prevent insolvency, as defined under Article XVI.

a. Section 215.555(4)(e)1., Florida Statutes, provides that the SBA shall advance to the Company amounts necessary to maintain the solvency of the Company, up to 50 percent of the SBA's estimate of the reimbursement due to the Company.

b. In addition to the requirements outlined in subparagraph (4)(a), the requirements for an advance to a Company to prevent insolvency are that the Company demonstrates it is likely to qualify for reimbursement and that the immediate receipt of moneys from the SBA is likely to prevent the Company from becoming insolvent, and the Company provides the following information:

Current assets;

ii.

Current liabilities other than liabilities due to the Covered Event;

iii.

Current surplus as to policyholders;

iv.

Estimate of other expected liabilities not due to the Covered Event; and

Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.

c. The SBA's final decision regarding an application for an advance to prevent insolvency shall be based on whether or not, considering the totality of the circumstances, including the SBA's obligations to provide reimbursement for all Covered Events occurring during the Contract Year, granting an advance is essential to allowing the entity to continue to pay additional claims for a Covered Event in a timely manner.

2. Advances to entities created pursuant to Section 627.351(6), Florida Statutes.

a. Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an

entity created pursuant to Section 627.351(6), Florida Statutes, up to 90 percent of the lesser of the SBA's estimate of the reimbursement due or the entity's share of the actual aggregate Reimbursement Premium for that Contract Year, multiplied by the current available liquid assets of the FHCF.

b. In addition to the requirements outlined in paragraph (4)(a), the requirements for an

advance to entities created pursuant to Section 627.351(6), Florida Statutes, are that the entity must demonstrate to the SBA that the advance is essential to allow the entity to pay claims for a Covered Event.

3. Advances to limited apportionment companies.

Section 215.555(4)(e)3., Florida Statutes, provides that the SBA may advance the amount of estimated reimbursement payable to limited apportionment companies.

(e) In determining whether or not to grant an advance and the amount of an advance, the SBA:

Shall determine whether its assets available for the payment of obligations are sufficient

and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;

Shall review and consider all the information submitted by such Companies;

Shall review such Companies' compliance with all requirements of Section 215.555,

Florida Statutes;

Shall consult with all relevant regulatory agencies to seek all relevant information;

Shall review the damage caused by the Covered Event and when that Covered Event

occurred;

Shall consider whether the Company has substantially exhausted amounts previously

advanced;

Shall consider any other factors deemed relevant; and

Shall require commercial self-insurance funds established under section 624.462, Florida

Statutes, to submit a copy of written estimates of expenses in support of the amount of advance requested.

(f) Any amount advanced by the SBA shall be used by the Company only to pay claims of its

policyholders for the Covered Event which has precipitated the immediate need to continue to pay additional claims as they become due.

(5) Inadequate Data Submissions

If exposure data or other information required to be reported by the Company under the terms of this Contract are not received by the FHCF in the format specified by the FHCF or is inadequate to the extent that the FHCF requires resubmission of data, the Company will be required to pay the FHCF a resubmission fee of $1,000 for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the Company's examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000.

A resubmission of exposure data may delay the processing of the Company's request for reimbursement or an advance.

(6) Confidential Information/Trade Secret Information

Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555, Florida Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of the State Constitution. If the Company submits other information to the FHCF intending to seek trade secret protection, as defined in Section 812.081, Florida Statutes, such information must be clearly marked "Trade Secret" and comply with all provisions of Florida law to protect such disclosure.

ARTICLE XI - COMMUTATION

(1) Timeframe for Commutation Process

(a)

The Company and SBA may mutually agree to initiate and complete a Commutation agreement for zero dollars at any time. Such zero-dollar Commutation, once completed, eliminates the mandatory FHCF Proof of Loss reporting requirements for the applicable Covered Event(s) for all reporting periods after the completion of the Commutation.

(b)

The Company and SBA may mutually agree to initiate the Commutation process after 36 months and prior to 60 months after the end of the Contract Year subject to the provisions in this Article.

(c)

Provided the Company and SBA do not mutually initiate the Commutation process in subparagraph (a) or (b), the Commutation process will begin upon the later to occur: 60 months after the end of the Contract Year or upon completion of the FHCF claims examination for the Company and the resolution of all outstanding examination issues.

(2) Final FHCF Proof of Loss Report(s)

(a)

No less than 36 months or more than 60 months after the end of the Contract Year, the Company shall file a final Proof of Loss Report for each Covered Event during the Contract Year, except for a Company that has entered into a Commutation agreement as described in sub-subparagraph (1)(a).

(b)

The final Proof of Loss Report must include the following supporting documentation:

1. All paid Losses, outstanding Losses, and incurred but not reported Losses, which are not finally settled and which may be reimbursable Losses under this Contract.

2. Requested supporting documentation (at a minimum, an adjuster's summary report or equivalent details) and a copy of a written opinion on the present value of the outstanding Losses and incurred but not reported Losses by the Company's certifying actuary.

(c) Increases in reported paid, outstanding, or incurred but not reported Losses on original or corrected Proof of Loss Report filings received later than 60 months after the end of the Contract Year shall not be eligible for reimbursement or Commutation.

(3) The Loss Valuation Process

Subject to the timeframes outlined in sub-paragraph (1), if the Company has submitted a Proof of Loss Report indicating that it exceeds or expects to exceed its Retention, the Company and the SBA, or their respective representatives, shall attempt to agree upon the present value of all outstanding Losses, both reported and incurred but not reported, resulting from Covered Events during the Contract Year.

(a)

The Loss valuation process may only begin after all other issues arising under this Contract have been resolved, including completion of the claims examination, and shall be suspended pending resolution of any such issues that arise during the Loss valuation process.

(b)

Payment by the SBA of its portion of any amount or amounts so mutually agreed and certified by the Company's certifying actuary shall constitute a complete and final release of the SBA in respect of all Losses, both reported and unreported, under this Contract.

(c)

If agreement on present value cannot be reached within 90 days of the FHCF's receipt of the final Proof of Loss Report, including supporting documentation in sub-subparagraph (2)(b), or completion of the claims examination, whichever is later, the Company and the SBA may mutually appoint an actuary to determine such Losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such Losses.

(d)

If the parties fail to agree on the valuation of any Losses, any difference in valuation of the Loss shall be settled by a panel of three actuaries, as provided in this subparagraph. Either the SBA or the Company may initiate the process under this subparagraph by providing written notice to the other party stating that the parties are at an impasse with respect to valuation of Losses and specifying the dollar amounts in dispute.

1. One actuary shall be chosen by each party, and the third actuary shall be chosen by those two actuaries. If either party does not appoint an actuary within 30 days after the initiation of the process, the other party may appoint two actuaries. If the two actuaries fail to agree on the selection of an independent third actuary within 30 days of their appointment, each of them shall name two, of whom the other shall decline one and the decision shall be Each party shall submit a written statement related to its valuation of Losses to the panel of actuaries and the opposing party no later than 30 days after the appointment of the third actuary.

made by drawing lots.

All of the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the American Academy of Actuaries.

None of the actuaries shall be under the control of either party to this Contract.

Within 15 days after receiving the other party's submission, a party may submit its written response to the panel of actuaries and the other party. After the appointment of the third actuary, a party may not communicate with the panel or any member of the panel except in writing simultaneously furnished to all members of the panel and the opposing party. Any member of the panel may present questions to be answered by both parties, which shall be answered in writing and simultaneously furnished to the members of the panel and the opposing party or, at the discretion of the panel, may be provided in a meeting or teleconference attended by both parties and all members of the panel.

The written decision of a majority of the panel as to the disagreement over the valuation of Losses identified in the written notice of impasse, when filed with the parties hereto, shall be final and binding on both parties.

(e)

The reasonable and customary expense of the actuaries and of the Commutation (as a result of sub-subparagraph (3)(c) and subparagraph (d)) shall be equally divided between the two parties. Said Commutation shall take place in Tallahassee, Florida, unless some other place is mutually agreed upon by the Company and the SBA.

(f)

Upon full execution of the Commutation agreement and the issuance of the final reimbursement payment, if any, each party, on behalf of its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys and its legal representatives, unconditionally and completely releases and forever discharges the other party, its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys, and its legal representatives from any and all past, present, and future rights, liabilities, and obligations including, but not limited to, payments, claims, debts, demands, causes of action, costs, disbursements, fees, attorneys' fees, expenses, damages, injuries, or losses of every kind, whether known or unknown, reported or unreported, or fixed or contingent, relating to or arising out of this Contract.

ARTICLE XII - TAXES

In consideration of the terms under which this Contract is issued, the Company agrees to make no deduction in respect of the Reimbursement Premium herein when making premium tax returns to the appropriate authorities. Should any taxes be levied on the Company in respect of the Reimbursement Premium herein, the Company agrees to make no claim upon the SBA for reimbursement in respect of such taxes.

ARTICLE XIII - ERRORS AND OMISSIONS

Any inadvertent delay, omission, or error on the part of the SBA shall not be held to relieve the Company from any liability which would attach to it hereunder if such delay, omission, or error had not been made.

ARTICLE XIV - INSPECTION OF RECORDS

The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of the Company relating to the Covered Policies under this Contract, including Company files concerning claims, Losses, or legal proceedings regarding subrogation or claims recoveries which involve this Contract, including premium, loss records and reports involving exposure data or Losses under Covered Policies. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or claims examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or claims examination once closed and the findings have been accepted by the Company; any re-opening shall be at the sole discretion of the SBA. If the State Board of Administration Finance Corporation has issued revenue bonds and relied upon the exposure and Loss data submitted and certified by the Company as accurate to determine the amount of bonding needed, the SBA may choose not to require, or accept, a resubmission if the resubmission will result in additional reimbursements to the Company. The SBA may require any discovered errors, inadvertent omissions, and typographical errors associated with the data reporting of insured values, discovered prior to the closing of the file and acceptance of the examination findings by the Company, to be corrected to reflect the proper values. The Company shall retain its records in accordance with the requirements for records retention regarding exposure reports and claims reports outlined herein, and in any administrative rules adopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as defined in definition (12)(b) of Article V, must be able to provide documentation that the policy covers personal residences, protects both the borrower's and lender's interest, and that the coverage is in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner's policy, the coverage amount that the homeowner has been notified of by the collateral protection insurer, or the coverage amount that the homeowner requests from the collateral protection insurer.

(1)

Purpose of FHCF Examination

The purpose of the examinations conducted by the SBA is to evaluate the accuracy of the FHCF

exposure or Loss data reported by the Company. However, due to the limited nature of the examination, it cannot be relied upon as an assurance that a Company's data is reported accurately or in its entirety. The Company should not rely on the FHCF to identify every type of reporting error in its data. In addition, the reporting requirements are subject to change each Contract Year so it is the Company's responsibility to be familiar with the applicable Contract Year requirements and to incorporate any changes into its data for that Contract Year. It is also the Company's responsibility to ensure that its data is reported accurately and to comply with Florida Statutes and any applicable rules when reporting exposure data. The examination report is not intended to provide a legal determination of the Company's compliance.

(2)

Examination Requirements for Exposure Verification

The Company shall retain complete and accurate records, in policy level detail, of all exposure data submitted to the SBA in any Contract Year until the SBA has completed its examination of the Company's exposure submissions. The Company shall also retain complete and accurate records of any completed exposure examination for any Contract Year in which the Company incurred Losses until the completion of the claims examination and Commutation for that Contract Year. The records to be retained are outlined in the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C. A complete list of records to be retained for the exposure examination is set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule 19-8.029, F.A.C.

(3)

Examination Requirements for Loss Reports

The Company shall retain complete and accurate records of all reported Losses and/or advances

submitted to the SBA until the SBA has completed its examination of the Company's reimbursable Losses and Commutation for the Contract Year (if applicable) has been concluded. The records to be retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B and Form FHCF-LAP1, both adopted for the Contract Year under Rule 19-8.029, F.A.C.

(4)

Examination Procedures

(a) The FHCF will send an examination notice letter to the Company providing the commencement date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the FHCF. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.

(b)

The reports and data are required to be forwarded to the FHCF as set forth in an examination notice letter. The information is then forwarded to the examiner. If the FHCF receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examination begins. Any records not required to be provided to the examiner in advance shall be made available at the time the examination begins. Any records to support reported exposure or Losses which are provided after the examination has been completed will, at the SBA's discretion, result in an additional examination of exposure and/or Loss records or an extension or expansion of the examination. All costs associated with such additional examination or with the extension or expansion of the original examination shall be borne by the Company.

(c)

At the conclusion of the examiner's work and the management review of the examiner's report, findings, recommendations, and work papers, the FHCF will forward an examination report to the Company.

(d)

Within 30 days from the date of the letter accompanying the examination report, the Company must provide a written response to the FHCF. The response must indicate whether the Company agrees with the findings and recommendations of the examination report. If the Company disagrees with any examination findings or recommendations, the reason for the disagreement must be outlined in the response and the Company must provide supporting information to support its objection. An extension of 30 days may be granted if the Company can show that the need for additional time is due to circumstances beyond the reasonable control of the Company. No response is required if the examination report does not include any findings or recommendations.

(e)

If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized and the exam file closed.

(f)

If the Company disputes the examiner's findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.

(g)

1. If the recommendation of the examiner is to resubmit the Company's exposure data for the

Contract Year in question, then the FHCF will send the Company a letter outlining the process for resubmission and including a deadline to resubmit. Once the resubmission is received, the FHCF's Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner's findings and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner's findings, the exam is closed.

2. If the recommendation of the examiner is to give the Company the option to either

resubmit the exposure data or to pay the estimated Reimbursement Premium difference, then the FHCF will send the Company a letter outlining the process for resubmission or for paying the estimated Reimbursement Premium difference and including a deadline for the resubmission or the payment to be received by the FHCF's Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIV(4) apply.

(h)

If the recommendation of the examiner is to update the Company's Proof of Loss Report(s) for the Contract Year under review, the FHCF will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and including a deadline to file. Once the Proof of Loss Report(s) is received by the FHCF's Administrator, the FHCF's Administrator will calculate a revised reimbursement. The SBA shall then review the submitted Proof of Loss Report(s) with respect to the examiner's findings and accept the Proof of Loss Report(s) as filed or contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner's findings, the exam is closed.

(i)

The examiner's list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company's policies or claims rather than the whole universe of the Company's Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company's book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.

(5) Costs of the Examinations

The costs of the examinations shall be borne by the SBA. The SBA shall be reimbursed by the Company for any reasonable and customary additional examination expenses incurred as a result of a Company's failure to provide requested information. All requested information must be complete and accurate.

ARTICLE XV - OFFSETS

The SBA reserves the right to offset amounts payable to the SBA from the Company, including amounts payable under the Reimbursement Contract for any Contract Year and also including the Company's full Reimbursement Premium for the current Contract Year (regardless of installment due dates), against any (1) Reimbursement Premium refunds under any Contract Year, (2) reimbursement or advance amounts, or (3) amounts agreed to in a Commutation agreement, which are due and payable to the Company from the SBA as a result of the liability of the SBA.

ARTICLE XVI - INSOLVENCY OF THE COMPANY

For the purpose of this Contract, a Company is insolvent when an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction. No reimbursements will be made until the FHCF has completed and closed its examination of the insolvent Company's Losses. Only those Losses supported by the examination will be reimbursed. Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay reimbursement moneys due an insolvent insurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. In light of the need for an immediate infusion of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may enter into agreements with FIGA allowing exposure and claims examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinations are completed. Such agreements must ensure the availability of the necessary records and adequate security must be provided so that if the FHCF determines that it overpaid FIGA on behalf of the Company, that the funds will be repaid to the FHCF by FIGA within a reasonable time.

ARTICLE XVII - TERMINATION

The FHCF and the obligations of both parties under this Contract can be terminated only as may be provided by law or applicable rules.

ARTICLE XVIII - VIOLATIONS

(1) Statutory Provisions

(a)

Section 215.555(10), Florida Statutes, provides that any violation of Section 215.555, Florida

Statutes, or of rules adopted under that section, constitutes a violation of the Florida Insurance Code. This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code, under the authority of that section of Florida Statutes.

(b)

Section 215.555(11), Florida Statutes, authorizes the SBA to take any action necessary to enforce the rules and the provisions and requirements of this Contract, required by and adopted pursuant to Section 215.555, Florida Statutes.

(2) Noncompliance

(a) As used in this Article, the term "noncompliance" means the failure of the Company to meet

any applicable requirement of Section 215.555, Florida Statutes, or of any rule adopted under the authority of that section of Florida Statutes, including, but not limited to, any failure to meet a deadline for an FHCF payment, Data Call submissions or resubmissions, Loss reporting or Commutation documentation, or a deadline related to SBA examination requirements. The Company remains in a state of noncompliance as long as the Company fails to meet the applicable requirement(s).

(b) If the Company is in a state of noncompliance, the SBA reserves the right to withhold any payments or advances due to the Company until the SBA determines that the Company is no longer in a state of noncompliance.

ARTICLE XIX - APPLICABLE LAW

This Contract shall be governed by and construed according to the laws of the State of Florida in respect of any matter relating to or arising out of this Contract.

ARTICLE XX - DUE DATES follows: Homeowners Choice Property and Casualty Insurance Company 90%

If any due date provided in this Contract is a Saturday, Sunday or a legal State of Florida or federal holiday, then the actual due date will be the day immediately following the applicable due date which is not a Saturday, Sunday or a legal State of Florida or federal holiday.

ARTICLE XXI - REIMBURSEMENT CONTRACT ELECTIONS

(1) Coverage Level

For purposes of determining reimbursement (if any) due the Company under this Contract and in accordance with the Statute, the Company has the option to elect a 45 percent or 75 percent or 90 percent Coverage Level under this Contract. If the Company is a member of an NAIC group, all members must elect the same Coverage Level, and the individual executing this Contract on behalf of the Company, by placing his or her initials in the box under (a) below, affirms that the Company has elected the same Coverage Level as all members of its NAIC group. If the Company is an entity created pursuant to Section 627.351, Florida Statutes, the Company must elect the 90 percent Coverage Level. The Company shall not be permitted to change its Coverage Level after the March 1 statutory deadline for execution of the Contract. The Company shall be permitted to change its Coverage Level upon timely execution of the Contract for the next Contract Year, but may not reduce its Coverage Level if revenue bonds issued under Section 215.555(6), Florida Statutes, are outstanding.

The Coverage Level elected by the Company for the prior Contract Year effective June 1, 2023 was as

(a) NAIC Group Affirmation: Indicate if the Company is part of an NAIC Group (enter Yes or No):


Yes

(b) Coverage Level Election: The Company hereby elects the following Coverage Level for the Contract Year from 12:00:01 a.m., Eastern Time, June 1, 2024, to 12:00 a.m., Eastern Time, May 31, 2025, (the individual executing this Contract on behalf of the Company shall place his or her initials in the box to the left of the percentage elected for the Company): 90%


45% OR	75% OR	90%

(2) Additional Living Expense (ALE) Written as Time Element Coverage

If your Company writes Covered Policies that provide ALE coverage on a time element basis (i.e.,

coverage is based on a specific period of time as opposed to a stated dollar limit), you must initial the `Yes — Time Element ALE' box below. If your Company does not write time element ALE coverage, initial `No — Time Element ALE' box below.



Yes - Time Element ALE	OR	No - Time Element ALE

ARTICLE XXII - COMPANY COVERAGE OF UNSOUND INSURERS

If a Company seeks to provide coverage for Covered Policies of an Unsound Insurer, pursuant to Section 215.555(5)(e), Florida Statutes, the Company may, subject to the provisions mutually agreed to below, obtain coverage for such policies under its Reimbursement Contract with the FHCF or accept an assignment of the Unsound Insurer's Reimbursement Contract with the FHCF. Prior to the date the Company takes a transfer of policies from an Unsound Insurer, the Company shall select one of the options below using Appendix A and submit to the SBA as instructed.

(1) Providing Coverage for an Unsound Insurer's Policies Under Company's FHCF Reimbursement Contract

(a)

If a Covered Event has occurred prior to the transfer of policies from an Unsound Insurer to the Company, the Company must accept an assignment of the Unsound Insurer's FHCF Reimbursement Contract and cannot cover such policies under the Company's Reimbursement Contract through an assumption of the Unsound Insurer's Covered Policies. Only in those situations where a Covered Event has not occurred shall the Company be able to obtain coverage under its own FHCF Reimbursement Contract for those policies assumed from an Unsound Insurer.

(b)

Responsibilities relating to the assumption of an Unsound Insurer's Covered Policies by the Company:

1. The Company shall accurately report the exposure and loss data related to Covered Policies assumed from the Unsound Insurer.

For an assumption of an Unsound Insurer's Covered Policies that occurs on or before June 30, 2024, the Company shall report the exposure in effect for such policies as of June 30, 2024. This includes assumed policies renewed with the Company on or before June 30, 2024. As outlined in the Data Call, all such policies must be combined with the Company's Covered policies written as its direct business and reported as a single submission due September 1, 2024.

For an assumption of Covered Policies from an Unsound Insurer to the Company that occurs after June 30, 2024, and before December 1, 2024, the Company shall report exposure in effect for such policies as of June 30, 2024, and the SBA shall treat all such policies as if they were in effect as of June 30, 2024, for the Company. The Company shall report assumed Covered Policies based on their status at June 30, 2024, in a single Data Call file combined with the Company's Covered Policies written as its direct business based on the requirements outlined in the Data Call. The combined Data Call file is due on September 1, 2024, or a maximum 60 days from the date of the assumption, whichever is later. If the Company's Data Call file has been previously submitted to the SBA, the Company will be required to resubmit its initial Data Call.

If the Company is unable to submit the combined Data Call file by September 1, 2024, the Company must initially submit its Data Call file with all of its direct written Covered Policies that were in effect as of June 30, 2024 (prior to the assumption of additional Covered Policies from an Unsound Insurer) by September 1, 2024. The Company will then need to resubmit the combined Data Call file no later than 60 days from the date of the assumption.

If a policy assumed by the Company from the Unsound Insurer is not reported in the Company's Data Call file, Losses under that policy may not be included in Losses reported to the SBA unless the Company is able to resubmit the Data Call file to include such omitted policies.

For an assumption of an Unsound Insurer's Covered Policies on or after December 1, 2024, through and including May 31 of the Contract Year, the Company is not required to report its assumed policies to the SBA until the subsequent Contract Year based on the status of the policy at June 30 of that subsequent Contract Year.

Except as noted above, for purposes of reporting Losses to the SBA, the Company shall report all Losses including those associated with Covered Policies assumed from the Unsound Insurer on Forms FHCF-L1A and FHCF-L1B as required under the Contract.

The FHCF Reimbursement Premium for all Covered Policies assumed from the Unsound Insurer by the Company shall be due on December 1, 2024, or within 15 days of being invoiced by the SBA, whichever is later. The total Reimbursement Premium resulting from the reporting of exposure on the Company's Covered Policies and the Reimbursement Premium associated with Covered Policies assumed by the Company from the Unsound Insurer shall be combined to determine the Company's retention and its share of the FHCF's capacity.

An administrative fee of $1,000 shall apply to each resubmission of exposure data for resubmissions that are not a result of an examination by the SBA. If a resubmission is necessary as a result of an examination report issued by the SBA, the first resubmission fee will be $2,000. If the first examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. Resubmission fees shall be invoiced along with the Reimbursement Premium billing discussed in (b) above.

The Company shall ensure that the books and records related to the Covered Policies assumed from the Unsound Insurer are preserved and accessible to the SBA for its exposure and claims examinations. The Company shall retain data related to the FHCF examinations as required in Forms FHCF-D1A, FHCF-DCL, FHCF-EAP1, and FHCF-LAP1 for the exposure assumed from the Unsound Insurer.

The Company is required to provide the SBA with a complete listing of all assumed policies, including Covered Policies and other policies not covered by the FHCF. As outlined in the Data Call, the listing must include each policy number and the policy's effective and expiration dates. In addition to the policy listing, the Company must provide an agreement between the Company and the Unsound Insurer that supports the number of policies assumed.

(2) Acceptance of an Assignment of an Unsound Insurer's FHCF Reimbursement Contract

(a) Responsibilities relating to assigned Reimbursement Contracts:

The Company, pursuant to Section 215.555(5)(e), Florida Statutes, has the rights and duties of the Unsound Insurer for such transferred Covered Policies.

The Company is responsible for the Reimbursement Premiums due under the assigned Reimbursement Contract. Should any Reimbursement Premium be owed at the time paid Losses for Covered Policies under the assigned Reimbursement Contract exceed the Retention under the assigned Reimbursement Contract, all Reimbursement Premiums (as well as any applicable fees and interest) shall be offset before the issuance of any reimbursement payment.

The Company has the responsibility to report all exposure and Loss information for Covered Policies under the assigned Reimbursement Contract separately for each assigned Reimbursement Contract pursuant to the reporting requirements specified in the Reimbursement Contract. If the Unsound Insurer has already submitted the required Data Call, the Company has the responsibility of filing any resubmissions as necessary.

The Company has the responsibility to ensure that the books and records related to the assigned Reimbursement Contract are preserved and accessible to the SBA for its exposure and claims examinations. The Company has the responsibility to retain data related to FHCF examinations as required in FHCF-D1A, FHCF-DCL, FHCF-EAP1, and FHCF-LAP1 for each assigned Reimbursement Contract.

(b) The Company will not be reimbursed by the SBA for any Losses occurring prior to the date it first provides coverage for such transferred policies. Reimbursements for those Losses shall be made to the Unsound Insurer, the court-appointed receiver, or the applicable guaranty association, as provided by statute.

ARTICLE XXIII - SIGNATURES

Approved by:

Paragon Strategic Solutions Inc., on Behalf of the State Board of Administration of the State of Florida and as Administrator of the Florida Hurricane Catastrophe Fund.

By: /s/ Martin K. Helgestad 2/28/2024

Signature Date

Authority to sign on behalf of the Company:

The person signing this Contract on behalf of the Company hereby represents that he or she is an officer of the Company, acting within his or her authority to enter into this Contract on behalf of the Company, with the requisite authority to bind the Company and make the representations on behalf of the Company as set forth in this Contract.

Homeowners Choice Property and Casualty Insurance Company

Karin Coleman President

By: /s/ Karin Coleman 2/27/2024

Signature Date

EX-10.9 3 hci-ex10_9.htm EX-10.9 EX-10.9

     

    STATE BOARD OF ADMINISTRATION 
OF FLORIDA
1801 HERMITAGE BOULEVARD, SUITE 100 
TALLAHASSEE, FLORIDA 32308
(850) 488-4406
POST OFFICE BOX 13300
32317-3300

    RON DESANTIS 
GOVERNOR 
CHAIR
JIMMY PATRONIS 
CHIEF FINANCIAL OFFICER
ASHLEY MOODY 
ATTORNEY GENERAL
LAMAR TAYLOR
INTERIM-EXECUTIVE DIRECTOR & 
CHIEF INVESTMENT OFFICER

   

EXHIBIT 10.9

REIMBURSEMENT CONTRACT

Coverage Effective: June 1, 2024

(“Contract”)

This Contract is between: TypTap Insurance Company

(“Company”)
NAIC # 15885
and

THE STATE BOARD OF ADMINISTRATION OF THE STATE OF FLORIDA (“SBA”) WHICH ADMINISTERS THE FLORIDA HURRICANE CATASTROPHE FUND (“FHCF”)

PREAMBLE

In consideration of the promises set forth in this Contract, the parties agree as follows:

ARTICLE I - SCOPE OF AGREEMENT

As a condition precedent to the SBA’s obligations under this Contract, the Company shall report to the SBA in a specified format the business it writes which is described in this Contract as Covered Policies. The terms of this Contract shall determine the rights and obligations of the parties. This Contract provides reimbursement to the Company under certain circumstances, as described herein, and does not provide or extend insurance or reinsurance coverage to any person, firm, corporation or other entity. The SBA shall reimburse the Company for its Ultimate Net Loss on Covered Policies, which were in force and in effect at the time of the Covered Event causing the Loss, in excess of the Company’s Retention as a result of each Covered Event commencing during the Contract Year, to the extent funds are available, all as hereinafter defined.

ARTICLE II - PARTIES TO THE CONTRACT

ARTICLE III – TERM; EXECUTION

(1)

Term

This Contract applies to Losses from Covered Events which commence during the period from 12:00:01 a.m., Eastern Time, June 1, 2024, to 12:00 midnight, Eastern Time, May 31, 2025 (the “Contract Year”). The SBA shall not be liable for Losses from Covered Events which commence after the effective time and date of expiration or termination. Should this Contract expire or terminate while a Covered Event is in progress, the SBA shall be responsible for such Covered Event in progress in the same manner and to the same extent it would have been responsible had the Contract expired the day following the conclusion of the Covered Event in progress.

(2)

Mandatory Nature of this Contract

(a) Statutory Requirement

This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code (F.A.C.), in fulfillment of the statutory requirement that the SBA enter into a Contract with each Company writing Covered Policies in Florida. Under Section 215.555(4)(a), Florida Statutes, the SBA must enter into such a Contract with each such Company, and each such Company must enter into the Contract as a condition of doing business in Florida. Under Section 215.555(16)(c), Florida Statutes, Companies writing Covered Policies must execute the Contract by March 1 of the immediately preceding Contract Year.

(b) Duty to Provide a Fully and Timely Executed Copy of this Contract to the FHCF

Administrator

The Company must provide a fully executed copy of this Contract in electronic form to the Administrator no later than the March 1 statutory deadline for execution, or, in the case of a New Participant, no later than 30 days after the New Participant began writing Covered Policies.

(3)

Contract Deemed Executed Notwithstanding Execution Errors

(a)

(b)

For a Company that is not a member of an NAIC group under which other Companies are active participants in the FHCF, the Coverage Level from the prior Contract Year shall be deemed.

(c)

For a New Participant that is a member of an NAIC group, the same Coverage Level selected by the other Companies of the same NAIC group shall be deemed.

(d)

ARTICLE IV - LIABILITY OF THE FHCF

(1)

The SBA shall reimburse the Company with respect to each Covered Event commencing during the Contract Year in the amount of Ultimate Net Loss paid by the Company in excess of the Company’s Retention, as adjusted pursuant to the definition of Retention in Article V, multiplied by the applicable Coverage Level, plus 10 percent of the reimbursed Losses as a Loss Adjustment Expense Allowance, the total of which shall not exceed the Company’s Limit.

(2)

(3)

In order to assure that reimbursements do not exceed the statutory limit on the obligation of the FHCF provided in Section 215.555(4)(c)1., Florida Statutes, the SBA shall, upon the occurrence of a Covered Event, evaluate the potential Losses to the FHCF and the FHCF’s capacity at the time of the event. The initial Projected Payout Multiple used to reimburse the Company for its Losses shall not exceed the Projected Payout Multiple as calculated based on the capacity needed to provide the FHCF’s coverage. If it appears that the Estimated Claims-Paying Capacity may be exceeded, the SBA shall reduce the projected payout factors or multiples for determining each participating insurer’s projected payout uniformly among all insurers to reflect the Estimated Claims-Paying Capacity.

(4)

Reimbursement amounts shall not be reduced by reinsurance paid or payable to the Company from other sources. Once the Company’s Limit has been exhausted, the Company will not be entitled to further reimbursements.

ARTICLE V - DEFINITIONS

As used in this Contract, the following words and phrases are defined to mean:

(1)

Actual Claims-Paying Capacity of the FHCF

(2)

Actuarially Indicated

(3)

Additional Living Expense (ALE)

(4)

Administrator

This term means the entity with which the SBA contracts to perform administrative tasks associated with the operations of the FHCF. The current Administrator is Paragon Strategic Solutions Inc.

(5)

Authorized Insurer

This term is defined in Section 624.09(1), Florida Statutes.

(6)

Balance of the Fund as of December 31 or Fund Balance

(7)

Borrowing Capacity

This term means the amount of funds which are able to be raised by the issuance of revenue bonds or through other financing mechanisms, less bond issuance expenses and reserves.

(8)

Citizens Property Insurance Corporation (Citizens)

(9)

Commutation

(10)

Covered Event

(11)

Coverage Level

(12)

Covered Policy

(a)

(b)

Covered Policy also includes any collateral protection insurance policy covering personal residences which protects both the borrower’s and the lender’s financial interest, in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy,

the coverage amount that the homeowner has been notified of by the collateral protection insurer, or

the coverage amount that the homeowner requests from the collateral protection insurer,

if such collateral protection insurance policy can be accurately reported as required in Section 215.555(5), Florida Statutes.

(c)

A Company will be deemed to be able to accurately report data if the company submits the required data as specified in the Data Call adopted under Rule 19-8.029, F.A.C.

(d)

Covered Policy does not include any policy or exposure excluded under Article VI.

(13)

Deductible Buy-Back Policy

This term means a specific policy that provides coverage to a policyholder for some portion of the

policyholder’s deductible under a policy issued by another insurer.

(14)

Estimated Claims-Paying Capacity of the FHCF

(15)

Excess Policy

(16)

Insurer Group

(17)

Limit

This term means the maximum amount that a Company may recover under this Contract, calculated by multiplying the Company’s Reimbursement Premium by the Payout Multiple.

(18)

Loss

(19) Loss Adjustment Expense Allowance

(a)

The Loss Adjustment Expense Allowance is equal to 10 percent of the reimbursed Losses under this Contract as provided in Article IV, pursuant to Section 215.555(4)(b)1., Florida Statutes.

(b)

The Loss Adjustment Expense Allowance is included in, and not in addition to, the Limit applicable to a Company.

(20) New Participant

This term means a Company that begins writing Covered Policies on or after the beginning of the

(21) Payout Multiple

(22) Premium Formula

This term means the Formula developed pursuant to Section 215.555(5)(b), Florida Statutes, and

approved by the SBA Trustees for the purpose of determining the Actuarially Indicated Reimbursement Premium to be paid to the FHCF.

(23) Projected Payout Multiple

The Projected Payout Multiple is used to calculate a Company’s projected payout pursuant to Section 215.555(4)(d)2., Florida Statutes. The Projected Payout Multiple is derived by dividing the estimated single season Claims-Paying Capacity of the FHCF by the estimated total aggregate industry Reimbursement Premium for the FHCF for the Contract Year. The Company’s Reimbursement Premium as paid to the SBA for the Contract Year is multiplied by the Projected Payout Multiple to estimate the Company’s coverage from the FHCF for the Contract Year.

(24) Reimbursement Premium or Premium

(25) Residential Structure

In general, this term means a unit or building used exclusively or predominantly for dwelling or

(a)

(b)

(c)

(d)

Residential Structures do not include any structures excluded under Article VI. (26) Retention

This term means the amount of Losses from a Covered Event which must be incurred by the Company before it is eligible for reimbursement from the FHCF.

(a)

When the Company incurs Losses from one or two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the Covered Events.

(b)

When the Company incurs Losses from more than two Covered Events during the Contract Year, the Company’s full Retention shall be applied to each of the two Covered Events causing the largest Losses for the Company. For each other Covered Event resulting in Losses, the Company’s Retention shall be reduced to one-third of its full Retention.

All reimbursement of Losses for each Covered Event shall be based on the Company’s full Retention until December 31 of the Contract Year. Adjustments to reflect a reduction to one-third of the full Retention shall be made on or after January 1 of the Contract Year provided the Company reports its Losses as specified in this Contract.

Adjustments to the Company’s Retention shall be based upon its paid and outstanding Losses as reported on the Company’s Proof of Loss Reports, but shall not include incurred but not reported Losses. The Company’s Proof of Loss Reports shall be used to determine which Covered Events constitute the Company’s two largest Covered Events. After this initial determination, any subsequent adjustments shall be made quarterly by the SBA only if the Proof of Loss Reports reveal that loss development patterns have resulted in a change in the order of Covered Events entitled to the reduction to one-third of the full Retention.

(c) The Company’s full Retention is established in accordance with the provisions of Section 215.555(2)(e), Florida Statutes, and shall be determined by multiplying the Retention Multiple by the Company’s Reimbursement Premium for the Contract Year.

(27) Retention Multiple

(a) The Retention Multiple is applied to the Company’s Reimbursement Premium to determine the Company’s Retention. The Retention Multiple for the 2024/2025 Contract Year shall be equal to $4.5 billion, adjusted based upon the reported exposure for the 2022/2023 Contract Year to reflect the percentage growth in exposure to the FHCF since 2004, divided by the estimated total industry Reimbursement Premium at the 90 percent Coverage Level for the Contract Year as determined by the SBA.

(b) The Retention Multiple shall be adjusted to reflect the Coverage Level elected by the Company under this Contract as follows:

If the Company elects the 90 percent Coverage Level, the adjusted Retention Multiple is 100 percent of the amount determined under paragraph (a);

If the Company elects the 75 percent Coverage Level, the adjusted Retention Multiple is 120 percent of the amount determined under paragraph (a); or

If the Company elects the 45 percent Coverage Level, the adjusted Retention Multiple is 200 percent of the amount determined under paragraph (a).

(28) Ultimate Net Loss

(a)

This term means all Losses under Covered Policies in force at the time of a Covered Event prior to the application of the Company’s Retention and Coverage Level and excluding loss adjustment expense and any exclusions under Article VI.

(b)

In calculating the Company’s Ultimate Net Loss, the amounts described in paragraph (a) shall be reduced by the deductibles applicable under the policy to the hurricane loss, without recognition of any credit earned or reduction to the deductible under the policy applied by the Company. The deductibles must first be applied to the portion of the Loss covered by the FHCF.

(c)

Salvages and all other recoveries, excluding reinsurance recoveries, shall be first deducted from such Loss to arrive at the amount of liability attaching hereunder.

(d)

(e)

(29) Unsound Insurer

This term means an insurer determined by the Office of Insurance Regulation to be in unsound condition as defined in Section 624.80(2), Florida Statutes, or an insurer placed in receivership under Chapter 631, Florida Statutes.

ARTICLE VI – EXCLUSIONS

This Contract does not provide reimbursement for:

(1)

Any losses not defined as being within the scope of a Covered Policy, including any loss other than a loss under the first-party property section of a policy pertaining strictly to the structure, its contents, appurtenant structures, or ALE coverage.

(2) Any policy which excludes wind or hurricane coverage.

(3) Any Excess Policy or Deductible Buy-Back Policy that requires individual ratemaking, as determined by the FHCF.

(4) (a) Any policy for Residential Structures that provides a layer of coverage underneath an Excess Policy issued by a different insurer;

(b)

(c)

Any other policy providing a layer of windstorm or hurricane coverage for a structure(s) below a layer of self-insured windstorm or hurricane coverage for the same structure(s); or

(d)

The exclusions in this subsection do not apply to primary quota share policies written by Citizens Property Insurance Corporation under Section 627.351(6)(c)2., Florida Statutes.

(5) Any liability of the Company attributable to losses for fair rental value, loss of rent or rental income, or business interruption.

(6) Any collateral protection policy that does not meet the definition of Covered Policy as defined in Article V(12)(b).

(7) Any reinsurance assumed by the Company.

(9)

Retail, office, mercantile, or manufacturing facilities, or other similar structures.

(10)

Any exposure for condominium or homeowner associations if no Residential Structures are insured under the policy.

(11)

(12)

(13)

Policies covering only Additional Living Expense.

(14)

Any exposure for barns or barns with apartments or living quarters.

(15)

Any exposure for builders risk coverage or new Residential Structures under construction.

(16)

Any exposure for vehicles, recreational vehicles, golf carts, or boats (including boat related equipment) requiring licensing.

(17)

(18)

Any losses paid in excess of a policy’s hurricane limit in force at the time of the Covered Event, including individual coverage limits (i.e., building, appurtenant structures, contents, and additional living expense), or other amounts paid as the result of a voluntary expansion of coverage by the insurer, including, but not limited to, a discount on or waiver of an applicable deductible. This exclusion includes overpayments of a specific individual coverage limit even if total payments under the policy are within the aggregate policy limit.

(19)

(20)

Any losses which the Company’s claims files do not adequately support. Claim file support shall be deemed adequate if in compliance with the Records Retention Requirements outlined on the Form FHCF-L1B (Proof of Loss Report) applicable to the Contract Year.

(21)

Any exposure for, or amounts paid to reimburse a policyholder for, condominium association loss assessments or under similar coverages for contractual liabilities.

(22)

Losses in excess of the aggregate limits of liability specified in Article IV and in Section 215.555(4)(c), Florida Statutes.

(23)

(24)

All liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any insolvency fund. “Insolvency fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, which provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, which has been declared by any competent authority to be insolvent, or which is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

(25)

(26)

Losses from water damage including flood, surface water, waves, tidal water, overflow of a body of water, storm surge, or spray from any of these, whether or not driven by wind.

(27)

A policy providing personal property coverage separate from coverage of personal property included in a homeowner’s, mobile homeowner’s, condominium unit owner’s, or tenant’s policy or other policy covering a Residential Structure, or in an endorsement to such a policy. Also excluded is a personal property endorsement to a policy that excludes windstorm or hurricane coverage or to any other type of policy that does not meet the definition of covered policy.

(28)

Endorsements predominantly covering Specialized Fine Arts Risks or collectible types of property meeting the following requirements:

1. For purposes of this exemption, a Specialized Fine Arts Risk endorsement is an endorsement that:

Charges a minimum premium of $500; and

Insures scheduled items valued, in the aggregate, at no less than $100,000.

Collection risk assessments;

Fire and security loss prevention;

Warehouse inspections to protect items stored off-site;

Assistance with collection inventory management; or

Collection valuation reviews.

(29) Any losses under liability coverages.

ARTICLE VII - MANAGEMENT OF CLAIMS AND LOSSES

ARTICLE VIII – REIMBURSEMENT ADJUSTMENTS

Section 215.555(4)(d) and (e), Florida Statutes, provides the SBA with the right to seek the return of excess reimbursements which have been paid to the Company along with interest thereon. Excess reimbursements are those payments made to the Company by the SBA that are in excess of the Company’s coverage under the Contract Year. Excess reimbursements may result from adjustments to the Projected Payout Multiple or the Payout Multiple, incorrect exposure (Data Call) submissions or resubmissions, incorrect calculation of Reimbursement Premium or Retention, incorrect Proof of Loss Reports, incorrect calculation of reinsurance recoveries, or subsequent readjustment of policyholder claims, including subrogation and salvage, or any combination of the foregoing. The Company will be sent an invoice showing the due date for adjustments along with the interest due thereon through the due date. The applicable interest rate for interest charges will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.

ARTICLE IX - REIMBURSEMENT PREMIUM

(1)

(2)

The Company’s Reimbursement Premium is based on its June 30 exposure in accordance with Article X, except as provided for New Participants under Article X, and is not adjusted to reflect an increase or decrease in exposure for Covered Policies effective after June 30 nor is the Reimbursement Premium adjusted when the Company cancels policies or is liquidated or otherwise changes its business status (merger, acquisition, or termination) or stops writing new business (continues in business with its policies in a runoff mode). Similarly, new business written after June 30 will not increase or decrease the Company’s FHCF Reimbursement Premium or impact its FHCF coverage. FHCF Reimbursement Premiums are required of all Companies based on their writing Covered Policies in Florida as of June 30, and each Company’s FHCF coverage as based on the definition in Section 215.555(2)(m), Florida Statutes, shall exist for the entirety of the Contract Year regardless of exposure changes, except as provided for New Participants under Article X.

(3) Since the calculation of the Actuarially Indicated Premium assumes that the Companies will pay their Reimbursement Premiums timely, interest charges will accrue under the following circumstances. A Company may choose to estimate its own Reimbursement Premium installments. However, if the Company’s estimation is less than the provisional Reimbursement Premium billed, an interest charge will accrue on the difference between the estimated Reimbursement Premium and the final Reimbursement Premium. If a Company estimates its first installment, the Administrator shall bill that estimated Reimbursement Premium as the second installment as well, which will be considered as an estimate by the Company. No interest will accrue regarding any provisional Reimbursement Premium if paid as billed by the FHCF’s Administrator, except in the case of an estimated second installment as set forth in this Article. Also, if a Company makes an estimation that is higher than the provisional Reimbursement Premium billed but is less than the final Reimbursement Premium, interest will not accrue. If the Reimbursement Premium payment is not received from a Company when it is due, an interest charge will accrue on a daily basis until the payment is received. Interest will also accrue on Reimbursement Premiums resulting from submissions or resubmissions finalized after December 1 of the Contract Year. An interest credit will be applied for any Reimbursement Premium which is overpaid as either an estimate or as a provisional Reimbursement Premium. Interest shall not be credited past December 1 of the Contract Year. The applicable interest rate for interest credits and charges will be the average rate earned by the SBA for the FHCF for the first four months of the Contract Year. For balances paid after the invoice due date, interest will accrue at this rate plus 5 percent.

ARTICLE X - REPORTS AND REMITTANCES
(1) Exposures

(a)

(b)

(c)

If the Company first begins writing Covered Policies on December 1 through and including May 31 of the Contract Year, the Company shall not report its exposure data for the Contract Year to the SBA.

(d)

(2) Reimbursement Premium

(a) If the Company writes Covered Policies before June 1 of the Contract Year, the Company shall pay the FHCF its Reimbursement Premium in installments due on or before August 1, October 1, and December 1 of the Contract Year in amounts to be determined by the FHCF. However, if the Company’s Reimbursement Premium for the prior Contract Year was less than $5,000, the Company’s full provisional Reimbursement Premium, in an amount equal to the Reimbursement Premium paid in the prior year, shall be due in full on or before August 1 of the Contract Year. The Company will be invoiced for amounts due, if any, beyond the provisional Reimbursement Premium payment, on or before December 1 of the Contract Year.

(b) If oversight of the Company has been transferred through any legal action to a court appointed receiver (referred to as “receivership”):

The full annual provisional Reimbursement Premium as billed and any outstanding balances will be due and payable no later than on August 1 or the date of receivership of the Contract Year.

Failure by such Company to pay the full annual provisional Reimbursement Premium as

To recognize that New Participants have limited exposure during this period, the actual Reimbursement Premium as determined by processing the Company's exposure data shall then be divided in half, the provisional Reimbursement Premium shall be credited, and the resulting amount shall be the total Reimbursement Premium due for the Company for the remainder of the Contract Year. However, if that amount is less than $1,000, then the Company shall pay $1,000. The Reimbursement Premium payment is due no later than April 1 of the Contract Year. The Company’s Retention and coverage will be determined based on the total Reimbursement Premium due as calculated above.

(d)

(e)

The requirement that the Reimbursement Premium is due on a certain date means that the Reimbursement Premium shall be remitted by wire transfer or ACH and shall have been credited to the FHCF’s account, as set out on the invoice sent to the Company, on the due date applicable to the particular installment.

(f)

Except as required by Section 215.555(7)(c), Florida Statutes, or as described in the following sentence, Reimbursement Premiums, together with earnings thereon, received in a given Contract Year will be used only to pay for Losses attributable to Covered Events occurring in that Contract Year or for Losses attributable to Covered Events in subsequent Contract Years and will not be used to pay for past Losses or for debt service on post-event revenue bonds issued pursuant to Section 215.555(6)(a)1., Florida Statutes. Reimbursement Premiums and earnings thereon may be used for payments relating to such revenue bonds in the event emergency assessments are insufficient. If Reimbursement Premiums or earnings thereon are used for debt service on post-event revenue bonds, then the amount of the Reimbursement Premiums or earnings thereon so used shall be returned, without interest, to the Fund when emergency assessments or other legally available funds remain available after making payment relating to the post-event revenue bonds and any other purposes for which emergency assessments were levied.

(3) Losses

(a) In General

(b) Loss Reports

To qualify for reimbursement, the Proof of Loss Report must have the electronic signatures of two executive officers authorized by the Company to sign or submit the report.

Updated Proof of Loss Reports for each Covered Event are due quarterly thereafter until the Commutation process described in Article XI is completed. The Company shall submit its quarterly Proof of Loss Reports with an “as of” date not more than sixty days prior to the applicable quarter-end date, and shall include a Detailed Claims Listing if requested by the SBA.

The SBA shall have the right to conduct a claims examination prior to the issuance of any advances or reimbursements requested by Companies that have been placed in receivership.

4. All Proof of Loss Reports qualifying for reimbursement will be compared with the FHCF’s exposure data to establish the facial reasonableness of the reports. The SBA may also review the results of current and prior Contract Year exposure and claims examinations to determine the reasonableness of the reported Losses. Except as noted in subparagraph 5., Companies meeting these tests for reasonableness will be scheduled for reimbursement. Companies not meeting these tests for reasonableness will be handled on a case-by-case basis and will be contacted to provide specific information regarding their individual book of business. The discovery of errors in a Company’s reported exposure under the Data Call may require a resubmission of the current Contract Year Data Call before the Company’s request for reimbursement or advance will be fully processed by the Administrator since the Data Call impacts the Company’s Reimbursement Premium, Retention, and coverage for the Contract Year.

1. In general, the Company’s paid Ultimate Net Losses must exceed its full Retention for a specific Covered Event before any reimbursement is payable from the FHCF for that Covered Event. As described in Article V(26)(b), Retention adjustments will be made on or after January 1 of the Contract Year. No interest is payable on additional payments to the Company due to this type of Retention adjustment. Each Company, including entities created pursuant to Section 627.351(6), Florida Statutes, incurring reimbursable Losses will receive the amount of reimbursement due under the individual Company’s Contract up to the amount of the Company’s payout.

If more than one Covered Event occurs in any one Contract Year, any reimbursements due from the FHCF shall take into account the Company’s Retention for each Covered Event. However, the Company’s reimbursements from the FHCF for all Covered Events occurring during the Contract Year shall not exceed, in aggregate, the Projected Payout Multiple or Payout Multiple, as applicable, times the individual Company’s Reimbursement Premium for the Contract Year.

(4) Advances

(a)

The SBA may make advances for loss reimbursements as defined herein, at market interest rates, to the Company in accordance with Section 215.555(4)(e), Florida Statutes. An advance is an early reimbursement which allows the Company to continue to pay claims in a timely manner. Advances will be made based on the Company’s paid and reported outstanding Losses for Covered Policies (excluding all incurred but not reported Losses) as reported on a Proof of Loss Report, and shall include a Loss Adjustment Expense Allowance as calculated by the FHCF. In order to be eligible for an advance, the Company must submit its exposure data for the Contract Year as required under subsection (1) of this Article. Except as noted below, advances, if approved, will be made as soon as practicable after the SBA receives a written request, signed by two officers of the Company, for an advance of a specific amount and any other information required for the specific type of advance under paragraphs (c) and (d). All reimbursements due to the Company shall be offset against any amount of outstanding advances plus the interest due thereon.

(b)

For advances or excess advances, which are advances that are in excess of the amount to which

the Company is entitled, the market interest rate shall be the prime rate as published in the Wall Street Journal on the first business day of the Contract Year. This rate will be adjusted annually on the first business day of each subsequent Contract Year, regardless of whether the Company executes subsequent Contracts. All interest charged will commence on the date the SBA issues a disbursement for an advance and will cease on the date upon which the FHCF has received the Company’s Proof of Loss Report for the Covered Event for which the Company qualifies for reimbursement. If such reimbursement is less than the amount of outstanding advances issued to the Company, interest will continue to accrue on the outstanding balance of the advances until subsequent Proof of Loss Reports qualify the Company for reimbursement under any Covered Event equal to or exceeding the amount of any outstanding advances.

Interest shall be billed on a periodic basis. If it is determined that the Company received funds in excess of those to which it was entitled, the interest as to those sums will not cease on the date of the receipt of the Proof of Loss Report but will continue until the Company reimburses the FHCF for the overpayment.

(c)

(d)

The specific type of advances enumerated in Section 215.555, Florida Statutes, follow.

1. Advances to Companies to prevent insolvency, as defined under Article XVI.

a. Section 215.555(4)(e)1., Florida Statutes, provides that the SBA shall advance to the Company amounts necessary to maintain the solvency of the Company, up to 50 percent of the SBA’s estimate of the reimbursement due to the Company.

Current assets;

ii.

Current liabilities other than liabilities due to the Covered Event;

iii.

Current surplus as to policyholders;

iv.

Estimate of other expected liabilities not due to the Covered Event; and

Amount of reinsurance available to pay claims for the Covered Event under other reinsurance treaties.

c. The SBA’s final decision regarding an application for an advance to prevent insolvency shall be based on whether or not, considering the totality of the circumstances, including the SBA’s obligations to provide reimbursement for all Covered Events occurring during the Contract Year, granting an advance is essential to allowing the entity to continue to pay additional claims for a Covered Event in a timely manner.

2. Advances to entities created pursuant to Section 627.351(6), Florida Statutes.

a. Section 215.555(4)(e)2., Florida Statutes, provides that the SBA may advance to an entity

created pursuant to Section 627.351(6), Florida Statutes, up to 90 percent of the lesser of the SBA’s estimate of the reimbursement due or the entity’s share of the actual aggregate Reimbursement Premium for that Contract Year, multiplied by the current available liquid assets of the FHCF.

b. In addition to the requirements outlined in paragraph (4)(a), the requirements for an advance to entities created pursuant to Section 627.351(6), Florida Statutes, are that the entity must demonstrate to the SBA that the advance is essential to allow the entity to pay claims for a Covered Event.

3. Advances to limited apportionment companies.

Section 215.555(4)(e)3., Florida Statutes, provides that the SBA may advance the amount of

estimated reimbursement payable to limited apportionment companies.

(e) In determining whether or not to grant an advance and the amount of an advance, the SBA:

Shall determine whether its assets available for the payment of obligations are sufficient and sufficiently liquid to fulfill its obligations to other Companies prior to granting an advance;

Shall review and consider all the information submitted by such Companies;

Shall review such Companies’ compliance with all requirements of Section 215.555, Florida Statutes;

Shall consult with all relevant regulatory agencies to seek all relevant information;

Shall review the damage caused by the Covered Event and when that Covered Event occurred;

Shall consider whether the Company has substantially exhausted amounts previously advanced;

Shall consider any other factors deemed relevant; and

Shall require commercial self-insurance funds established under section 624.462, Florida Statutes, to submit a copy of written estimates of expenses in support of the amount of advance requested.

(f) Any amount advanced by the SBA shall be used by the Company only to pay claims of its policyholders for the Covered Event which has precipitated the immediate need to continue to pay additional claims as they become due.

(5) Inadequate Data Submissions

If the Company’s examination-required resubmission is inadequate and the SBA requires an additional resubmission(s), the resubmission fee for each subsequent resubmission shall be $2,000. A resubmission of exposure data may delay the processing of the Company’s request for reimbursement or an advance.

(6) Confidential Information/Trade Secret Information

Pursuant to the provisions of Section 215.557, Florida Statutes, the reports of insured values under Covered Policies by ZIP Code submitted to the SBA pursuant to Section 215.555, Florida Statutes, are confidential and exempt from the provisions of Section 119.07(1), Florida Statutes, and Section 24(a), Art. I of the State Constitution. If the Company submits other information to the FHCF intending to seek trade secret protection, as defined in Section 812.081, Florida Statutes, such information must be clearly marked “Trade Secret” and comply with all provisions of Florida law to protect such disclosure.

ARTICLE XI – COMMUTATION

(1) Timeframe for Commutation Process

(a)

(b)

The Company and SBA may mutually agree to initiate the Commutation process after 36 months and prior to 60 months after the end of the Contract Year subject to the provisions in this Article.

(c)

(2) Final FHCF Proof of Loss Report(s)

(a)

(b)

The final Proof of Loss Report must include the following supporting documentation:

1. All paid Losses, outstanding Losses, and incurred but not reported Losses, which are not finally

settled and which may be reimbursable Losses under this Contract.

2. Requested supporting documentation (at a minimum, an adjuster’s summary report or equivalent details) and a copy of a written opinion on the present value of the outstanding Losses and incurred but not reported Losses by the Company’s certifying actuary.

(3) The Loss Valuation Process

(a)

(b)

Payment by the SBA of its portion of any amount or amounts so mutually agreed and certified by the Company’s certifying actuary shall constitute a complete and final release of the SBA in respect of all Losses, both reported and unreported, under this Contract.

(c)

If agreement on present value cannot be reached within 90 days of the FHCF’s receipt of the final Proof of Loss Report, including supporting documentation in sub-subparagraph (2)(b), or completion of the claims examination, whichever is later, the Company and the SBA may mutually appoint an actuary to determine such Losses. If both parties then agree, the SBA shall pay its portion of the amount so determined to be the present value of such Losses.

(d)

All of the actuaries shall be regularly engaged in the valuation of property claims and losses and shall be members of the Casualty Actuarial Society and of the American Academy of Actuaries.

None of the actuaries shall be under the control of either party to this Contract.

Each party shall submit a written statement related to its valuation of Losses to the panel of

actuaries and the opposing party no later than 30 days after the appointment of the third actuary. Within 15 days after receiving the other party’s submission, a party may submit its written response to the panel of actuaries and the other party. After the appointment of the third actuary, a party may not communicate with the panel or any member of the panel except in writing simultaneously furnished to all members of the panel and the opposing party. Any member of the panel may present questions to be answered by both parties, which shall be answered in writing and simultaneously furnished to the members of the panel and the opposing party or, at the discretion of the panel, may be provided in a meeting or teleconference attended by both parties and all members of the panel.

(e)

(f)

Upon full execution of the Commutation agreement and the issuance of the final reimbursement payment, if any, each party, on behalf of its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys and its legal representatives, unconditionally and completely releases and forever discharges the other party, its predecessors, successors, assigns, and its past, present and future officers, directors, shareholders, employees, agents, receivers, trustees, attorneys, and its legal representatives from any and all past, present, and future rights, liabilities, and obligations including, but not limited to, payments, claims, debts, demands, causes of action, costs, disbursements, fees, attorneys’ fees, expenses, damages, injuries, or losses of every kind, whether known or unknown, reported or unreported, or fixed or contingent, relating to or arising out of this Contract.

ARTICLE XII - TAXES

ARTICLE XIII - ERRORS AND OMISSIONS

Any inadvertent delay, omission, or error on the part of the SBA shall not be held to relieve the Company

from any liability which would attach to it hereunder if such delay, omission, or error had not been made.

ARTICLE XIV - INSPECTION OF RECORDS

The Company shall allow the SBA to inspect, examine, and verify, at reasonable times, all records of the Company relating to the Covered Policies under this Contract, including Company files concerning claims, Losses, or legal proceedings regarding subrogation or claims recoveries which involve this Contract, including premium, loss records and reports involving exposure data or Losses under Covered Policies. This right by the SBA to inspect, examine, and verify shall survive the completion and closure of an exposure examination or claims examination file and the termination of the Contract. The Company shall have no right to re-open an exposure or claims examination once closed and the findings have been accepted by the Company; any re-opening shall be at the sole discretion of the SBA. If the State Board of Administration Finance Corporation has issued revenue bonds and relied upon the exposure and Loss data submitted and certified by the Company as accurate to determine the amount of bonding needed, the SBA may choose not to require, or accept, a resubmission if the resubmission will result in additional reimbursements to the Company. The SBA may require any discovered errors, inadvertent omissions, and typographical errors associated with the data reporting of insured values, discovered prior to the closing of the file and acceptance of the examination findings by the Company, to be corrected to reflect the proper values. The Company shall retain its records in accordance with the requirements for records retention regarding exposure reports and claims reports outlined herein, and in any administrative rules adopted pursuant to Section 215.555, Florida Statutes. Companies writing covered collateral protection policies, as defined in definition (12)(b) of Article V, must be able to provide documentation that the policy covers personal residences, protects both the borrower’s and lender’s interest, and that the coverage is in an amount at least equal to the coverage for the dwelling in place under the lapsed homeowner’s policy, the coverage amount that the homeowner has been notified of by the collateral protection insurer, or the coverage amount that the homeowner requests from the collateral protection insurer.

(1)

Purpose of FHCF Examination

The purpose of the examinations conducted by the SBA is to evaluate the accuracy of the FHCF

exposure or Loss data reported by the Company. However, due to the limited nature of the examination, it cannot be relied upon as an assurance that a Company’s data is reported accurately or in its entirety. The Company should not rely on the FHCF to identify every type of reporting error in its data. In addition, the reporting requirements are subject to change each Contract Year so it is the Company’s responsibility to be familiar with the applicable Contract Year requirements and to incorporate any changes into its data for that Contract Year. It is also the Company’s responsibility to ensure that its data is reported accurately and to comply with Florida Statutes and any applicable rules when reporting exposure data. The examination report is not intended to provide a legal determination of the Company’s compliance.

(2)

Examination Requirements for Exposure Verification

The Company shall retain complete and accurate records, in policy level detail, of all exposure data

submitted to the SBA in any Contract Year until the SBA has completed its examination of the Company’s exposure submissions. The Company shall also retain complete and accurate records of any completed exposure examination for any Contract Year in which the Company incurred Losses until the completion of the claims examination and Commutation for that Contract Year. The records to be retained are outlined in the Data Call adopted for the Contract Year under Rule 19-8.029, F.A.C. A complete list of records to be retained for the exposure examination is set forth in Form FHCF-EAP1, adopted for the Contract Year under Rule 19-8.029, F.A.C.

(3)

Examination Requirements for Loss Reports

The Company shall retain complete and accurate records of all reported Losses and/or advances

submitted to the SBA until the SBA has completed its examination of the Company’s reimbursable Losses and Commutation for the Contract Year (if applicable) has been concluded. The records to be retained are set forth as part of the Proof of Loss Report, Form FHCF-L1B and Form FHCF-LAP1, both adopted for the Contract Year under Rule 19-8.029, F.A.C.

(4)

Examination Procedures

(a) The FHCF will send an examination notice letter to the Company providing the commencement

date of the examination, the site of the examination, any accommodation requirements of the examiner, and the reports and data which must be assembled by the Company and forwarded to the FHCF. The Company shall be prepared to choose one location in which to be examined, unless otherwise specified by the SBA.

(b)

The reports and data are required to be forwarded to the FHCF as set forth in an examination notice letter. The information is then forwarded to the examiner. If the FHCF receives accurate and complete records as requested, the examiner will contact the Company to inform the Company as to what policies or other documentation will be required once the examination begins. Any records not required to be provided to the examiner in advance shall be made available at the time the examination begins. Any records to support reported exposure or Losses which are provided after the examination has been completed will, at the SBA’s discretion, result in an additional examination of exposure and/or Loss records or an extension or expansion of the examination. All costs associated with such additional examination or with the extension or expansion of the original examination shall be borne by the Company.

(c)

At the conclusion of the examiner’s work and the management review of the examiner’s report, findings, recommendations, and work papers, the FHCF will forward an examination report to the Company.

(d)

(e)

If the Company accepts the examination findings and recommendations, and there is no recommendation for additional information, the examination report will be finalized and the exam file closed.

(f)

If the Company disputes the examiner’s findings, the areas in dispute will be resolved by a meeting or a conference call between the Company and FHCF management.

(g)

1. If the recommendation of the examiner is to resubmit the Company’s exposure data for the

Contract Year in question, then the FHCF will send the Company a letter outlining the process for resubmission and including a deadline to resubmit. Once the resubmission is received, the FHCF’s Administrator calculates a revised Reimbursement Premium for the Contract Year which has been examined. The SBA shall then review the resubmission with respect to the examiner’s findings and accept the resubmission or contact the Company with any questions regarding the resubmission. Once the SBA has accepted the resubmission as a sufficient response to the examiner’s findings, the exam is closed.

2. If the recommendation of the examiner is to give the Company the option to either resubmit

the exposure data or to pay the estimated Reimbursement Premium difference, then the FHCF will send the Company a letter outlining the process for resubmission or for paying the estimated Reimbursement Premium difference and including a deadline for the resubmission or the payment to be received by the FHCF’s Administrator. If the Company chooses to resubmit, the same procedures outlined in Article XIV(4) apply.

(h)

If the recommendation of the examiner is to update the Company’s Proof of Loss Report(s) for the Contract Year under review, the FHCF will send the Company a letter outlining the process for submitting the Proof of Loss Report(s) and including a deadline to file. Once the Proof of Loss Report(s) is received by the FHCF’s Administrator, the FHCF’s Administrator will calculate a revised reimbursement. The SBA shall then review the submitted Proof of Loss Report(s) with respect to the examiner’s findings and accept the Proof of Loss Report(s) as filed or contact the Company with any questions. Once the SBA has accepted the corrected Proof of Loss Report(s) as a sufficient response to the examiner’s findings, the exam is closed.

(i)

The examiner’s list of errors is made available in the examination report sent to the Company. Given that the examination was based on a sample of the Company’s policies or claims rather than the whole universe of the Company’s Covered Policies or reported claims, the error list is not intended to provide a complete list of errors but is intended to indicate what information needs to be reviewed and corrected throughout the Company’s book of Covered Policy business or claims information to ensure more complete and accurate reporting to the FHCF.

(5) Costs of the Examinations

The costs of the examinations shall be borne by the SBA. The SBA shall be reimbursed by the Company for any reasonable and customary additional examination expenses incurred as a result of a Company’s failure to provide requested information. All requested information must be complete and accurate.

ARTICLE XV – OFFSETS

The SBA reserves the right to offset amounts payable to the SBA from the Company, including amounts payable under the Reimbursement Contract for any Contract Year and also including the Company’s full Reimbursement Premium for the current Contract Year (regardless of installment due dates), against any (1) Reimbursement Premium refunds under any Contract Year, (2) reimbursement or advance amounts, or (3) amounts agreed to in a Commutation agreement, which are due and payable to the Company from the SBA as a result of the liability of the SBA.

ARTICLE XVI - INSOLVENCY OF THE COMPANY

For the purpose of this Contract, a Company is insolvent when an order of liquidation with a finding of insolvency has been entered by a court of competent jurisdiction. No reimbursements will be made until the FHCF has completed and closed its examination of the insolvent Company’s Losses. Only those Losses supported by the examination will be reimbursed. Pursuant to Section 215.555(4)(g), Florida Statutes, the FHCF is required to pay reimbursement moneys due an insolvent insurer to the Florida Insurance Guaranty Association (FIGA) for the benefit of Florida policyholders. In light of the need for an immediate infusion of funds to enable policyholders of insolvent companies to be paid for their claims, the SBA may enter into agreements with FIGA allowing exposure and claims examinations to take place immediately without the usual notice and response time limitations and allowing the FHCF to make reimbursements (net of any amounts payable to the SBA from the Company or FIGA) to FIGA before the examinations are completed. Such agreements must ensure the availability of the necessary records and adequate security must be provided so that if the FHCF determines that it overpaid FIGA on behalf of the Company, that the funds will be repaid to the FHCF by FIGA within a reasonable time.

ARTICLE XVII - TERMINATION

The FHCF and the obligations of both parties under this Contract can be terminated only as may be provided

by law or applicable rules.

ARTICLE XVIII – VIOLATIONS

(1) Statutory Provisions

(a)

Section 215.555(10), Florida Statutes, provides that any violation of Section 215.555, Florida Statutes, or of rules adopted under that section, constitutes a violation of the Florida Insurance Code. This Contract has been adopted as part of Rule 19-8.010, Florida Administrative Code, under the authority of that section of Florida Statutes.

(b)

(2) Noncompliance

(a) As used in this Article, the term “noncompliance” means the failure of the Company to meet any applicable requirement of Section 215.555, Florida Statutes, or of any rule adopted under the authority of that section of Florida Statutes, including, but not limited to, any failure to meet a deadline for an FHCF payment, Data Call submissions or resubmissions, Loss reporting or Commutation documentation, or a deadline related to SBA examination requirements. The Company remains in a state of noncompliance as long as the Company fails to meet the applicable requirement(s).

ARTICLE XIX - APPLICABLE LAW

This Contract shall be governed by and construed according to the laws of the State of Florida in respect of

any matter relating to or arising out of this Contract.

ARTICLE XX – DUE DATES

ARTICLE XXI – REIMBURSEMENT CONTRACT ELECTIONS

(1) Coverage Level

The Coverage Level elected by the Company for the prior Contract Year effective June 1, 2023 was as

follows: TypTap Insurance Company
90%

(a) NAIC Group Affirmation: Indicate if the Company is part of an NAIC Group (enter Yes or No):


Yes


45% OR	75% OR	90%

(2) Additional Living Expense (ALE) Written as Time Element Coverage

If your Company writes Covered Policies that provide ALE coverage on a time element basis (i.e.,

coverage is based on a specific period of time as opposed to a stated dollar limit), you must initial the ‘Yes – Time Element ALE’ box below. If your Company does not write time element ALE coverage, initial ‘No – Time Element ALE’ box below.

OR

    Yes - Time 
Element ALE

    No - Time 
Element ALE

ARTICLE XXII – COMPANY COVERAGE OF UNSOUND INSURERS

If a Company seeks to provide coverage for Covered Policies of an Unsound Insurer, pursuant to Section 215.555(5)(e), Florida Statutes, the Company may, subject to the provisions mutually agreed to below, obtain coverage for such policies under its Reimbursement Contract with the FHCF or accept an assignment of the Unsound Insurer’s Reimbursement Contract with the FHCF. Prior to the date the Company takes a transfer of policies from an Unsound Insurer, the Company shall select one of the options below using Appendix A and submit to the SBA as instructed.

(1) Providing Coverage for an Unsound Insurer’s Policies Under Company’s FHCF Reimbursement Contract

(a)

If a Covered Event has occurred prior to the transfer of policies from an Unsound Insurer to the Company, the Company must accept an assignment of the Unsound Insurer’s FHCF Reimbursement Contract and cannot cover such policies under the Company’s Reimbursement Contract through an assumption of the Unsound Insurer’s Covered Policies. Only in those situations where a Covered Event has not occurred shall the Company be able to obtain coverage under its own FHCF Reimbursement Contract for those policies assumed from an Unsound Insurer.

(b)

Responsibilities relating to the assumption of an Unsound Insurer’s Covered Policies by the Company:

1. The Company shall accurately report the exposure and loss data related to Covered Policies assumed from the Unsound Insurer.

For an assumption of an Unsound Insurer’s Covered Policies that occurs on or before June 30, 2024, the Company shall report the exposure in effect for such policies as of June 30, 2024. This includes assumed policies renewed with the Company on or before June 30, 2024. As outlined in the Data Call, all such policies must be combined with the Company’s Covered policies written as its direct business and reported as a single submission due September 1, 2024.

For an assumption of Covered Policies from an Unsound Insurer to the Company that occurs after June 30, 2024, and before December 1, 2024, the Company shall report exposure in effect for such policies as of June 30, 2024, and the SBA shall treat all such policies as if they were in effect as of June 30, 2024, for the Company. The Company shall report assumed Covered Policies based on their status at June 30, 2024, in a single Data Call file combined with the Company’s Covered Policies written as its direct business based on the requirements outlined in the Data Call. The combined Data Call file is due on September 1, 2024, or a maximum 60 days from the date of the assumption, whichever is later. If the Company’s Data Call file has been previously submitted to the SBA, the Company will be required to resubmit its initial Data Call.

If a policy assumed by the Company from the Unsound Insurer is not reported in the Company’s Data Call file, Losses under that policy may not be included in Losses reported to the SBA unless the Company is able to resubmit the Data Call file to include such omitted policies.

For an assumption of an Unsound Insurer’s Covered Policies on or after December 1, 2024, through and including May 31 of the Contract Year, the Company is not required to report its assumed policies to the SBA until the subsequent Contract Year based on the status of the policy at June 30 of that subsequent Contract Year.

The FHCF Reimbursement Premium for all Covered Policies assumed from the Unsound Insurer by the Company shall be due on December 1, 2024, or within 15 days of being invoiced by the SBA, whichever is later. The total Reimbursement Premium resulting from the reporting of exposure on the Company’s Covered Policies and the Reimbursement Premium associated with Covered Policies assumed by the Company from the Unsound Insurer shall be combined to determine the Company’s retention and its share of the FHCF’s capacity.

In addition to the policy listing, the Company must provide an agreement between the Company and the Unsound Insurer that supports the number of policies assumed.

(2) Acceptance of an Assignment of an Unsound Insurer’s FHCF Reimbursement Contract

(a) Responsibilities relating to assigned Reimbursement Contracts:

The Company, pursuant to Section 215.555(5)(e), Florida Statutes, has the rights and duties of the Unsound Insurer for such transferred Covered Policies.

ARTICLE XXIII – SIGNATURES

Approved by:

Paragon Strategic Solutions Inc., on Behalf of the State Board of Administration of the State of Florida and as Administrator of the Florida Hurricane Catastrophe Fund.

By: /s/ Martin K. Helgestad 2/28/2024

Signature Date

Authority to sign on behalf of the Company:

TypTap Insurance Company

Kevin Mitchell President

By: /s/ Kevin Mitchell 2/21/2024

Signature Date

EX-10.10 4 hci-ex10_10.htm EX-10.10 EX-10.10

EXHIBIT 10.10. Certain identified information has been excluded from this exhibit because it is immaterial and would be competitively harmful if publicly disclosed. Information that has been omitted is indicated with brackets.

EXHIBIT 10.10UNDERLYING SECOND LAYER PROPERTY CATASTROPHE

EXCESS OF LOSS REINSURANCE CONTRACT

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 1


UNDERLYING SECOND LAYER PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS
Article	Page

	Preamble	3
1	Business Covered	4
2	Retention and Limit	4
3	Florida Hurricane Catastrophe Fund	5
4	Term	6
5	Special Termination	6
6	Territory	8
7	Exclusions	8
8	Special Acceptance	10
9	Premium	10
10	Reinstatement	11
11	Definitions	11
12	Extra Contractual Obligations/Excess of Policy Limits	14
13	Net Retained Liability	15
14	Original Conditions	15
15	No Third Party Rights	16
16	Notice of Loss and Loss Settlements	16
17	Late Payments	16
18	Offset	18
19	Currency	18
20	Unauthorized Reinsurance	18
21	Taxes	21
22	Access to Records	21
23	Confidentiality	22
24	Indemnification and Errors and Omissions	23
25	Insolvency	23
26	Run-Off Reinsurer	25
27	Arbitration	26
28	Expedited Arbitration	27
29	Service of Suit	28
30	Governing Law	29
31	Entire Agreement	29
32	Non-Waiver	29
33	Sanction Limitation and Exclusion Clause	29
34	Intermediary	30
35	Mode of Execution	30
	Company Signing Block	31

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 2




UNDERLYING SECOND LAYER PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS
Attachments	Page

	Pools, Associations & Syndicates Exclusions Clause	32
	Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A.	35
	Terrorism Exclusion	37
	Limited Communicable Disease Exclusion (Property Treaty Reinsurance)	38
	Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance)	39
	Trust Agreement Requirements Clause	40

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 3

UNDERLYING SECOND LAYER PROPERTY CATASTROPHE

EXCESS OF LOSS REINSURANCE CONTRACT

(the “Contract”)

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

(collectively, the “Company”)

THE SUBSCRIBING REINSURER(S) IDENTIFIED IN THE
INTERESTS AND LIABILITIES AGREEMENT(S) ATTACHED TO
AND FORMING PART OF THIS CONTRACT

(the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Company in respect of its net excess liability as a result of any

loss or losses which may occur during the term of this Contract under any Policies in force at the effective date hereof or issued or renewed on or after that date, covering direct and assumed business classified by the Company as the property perils of Business Owners, Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms and conditions herein contained.

ARTICLE 2

RETENTION AND LIMIT

A. The Reinsurer shall be liable in respect of each Loss Occurrence, for the Ultimate Net Loss over and above an initial Ultimate Net Loss of [ ] each Loss Occurrence, subject to a limit of liability to the Reinsurer of [ ] each Loss Occurrence, and subject further to a limit of liability of [ ] for all Loss Occurrences commencing during the term of this Contract.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 4

B. No Loss Occurrence shall be covered hereunder unless it involves two or more risks subject to this Contract. The Company shall be the sole judge of what constitutes one risk for purposes of this Contract.

ARTICLE 3

FLORIDA HURRICANE CATASTROPHE FUND

A. As respects Loss Occurrences subject to this Contract, any loss reimbursement recoverable by the Company under the Florida Hurricane Catastrophe Fund (FHCF) shall be deducted in determining Ultimate Net Loss under this Contract, subject to the following:

1. The full reimbursement amount due from the FHCF for coverage under the Mandatory Layer, based on statutory limits of coverage as of June 1, shall be deemed recovered by the Company, whether or not actually received from the FHCF and whether or not reduced because of the FHCF’s inability to pay.

2. For purposes of allocating recoveries from the FHCF with respect to each Loss Occurrence, only amounts recoverable by applying the pay-out and retention multiples for the FHCF prior to any reduction in retention due to multiple Loss Occurrences in the same annual period shall be included in calculating the deduction from Ultimate Net Loss.

3. If the Company’s aggregate limit of FHCF reimbursement coverage is exhausted from Loss Occurrences commencing during the term of this Contract, and the FHCF does not designate the portion of said limit allocable to each Loss Occurrence, the total FHCF reimbursement received shall be allocated to each individual Loss Occurrence in the proportion that the Company’s losses in that Loss Occurrence bear to the Company’s total losses arising out of all Loss Occurrences to which the reimbursement applies.

4. For purposes of loss recoveries under this Contract prior to the final determination of the Company’s retention and limit under the FHCF; the FHCF shall be calculated using the Company’s respective “Projected Payout Multiple” under the FHCF. Upon determination of the Company’s retention and limit under the FHCF, losses will be adjusted, recognizing any adjustment to the “Projected Payout Multiple” caused by a change in the Aggregate Mandatory FHCF Premium or any other adjustments as required by statute to determine the final FHCF, but disregarding any change due to a decrease in the statutory limit.

B. Any FHCF reimbursement premiums paid by the Company for FHCF layers that inure to the benefit of this Contract shall be deemed to be premiums paid for inuring reinsurance.

C. The Company has opted for 90% coverage selections from the FHCF.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 5

ARTICLE 4

TERM

This Contract shall take effect at 12:01 a.m., Eastern Time, June 1, 2024, and unless terminated prior to that time and date as provided in the Special Termination Article, shall remain in effect until 12:01 a.m., Eastern Time, June 1, 2025, applying to Loss Occurrences commencing during the term of this Contract.

ARTICLE 5

SPECIAL TERMINATION

A. The Company may terminate a Subscribing Reinsurer’s percentage share in this Contract at any time by giving written notice to the Subscribing Reinsurer in the event of any of the following circumstances:

1. The Subscribing Reinsurer ceases underwriting operations.

2. A state insurance department or other legal authority orders the Subscribing Reinsurer to cease writing business, or the Subscribing Reinsurer is placed under regulatory supervision.

3. The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations.

4. The Subscribing Reinsurer’s policyholders’ surplus (or the equivalent under the Subscribing Reinsurer’s accounting system) as reported in such financial statements of the Subscribing Reinsurer as designated by the Company, has been reduced by 20% of the amount thereof at any date during the prior 12-month period (including the period prior to the inception of this Contract).

5. The Subscribing Reinsurer has become, or has announced its intention to become, merged with or acquired or controlled by any company, corporation, or individual(s) not controlling the Subscribing Reinsurer’s operations at the inception of this Contract.

6. The Subscribing Reinsurer has retroceded its entire liability under this Contract without the Company’s prior written consent, except for retrocessions to members of the Subscribing Reinsurer’s holding company group.

7. The Subscribing Reinsurer has been assigned an A.M. Best’s rating of less than “A-” and/or an S&P rating of less than “BBB+.” However, as respects Underwriting

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 6

Members of Lloyd’s, London, a Lloyd’s Market Rating of less than “A-” by A.M. Best and/or less than “BBB+” by S&P shall apply.

8. The Subscribing Reinsurer has hired an unaffiliated runoff claims manager that is compensated on a contingent basis or is otherwise provided with financial incentives based on the quantum of claims paid.

9. The Subscribing Reinsurer has in any other way assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

10. The Subscribing Reinsurer has failed to post or maintain required collateral to secure its obligations as required under this Contract, and has not cured such deficiency within 30 days following written notice thereof from the Company.

Notwithstanding the foregoing, agreement by a Lloyd’s syndicate to follow claim settlements procedures under Lloyd’s Claims Scheme (Combined) shall not constitute a transfer or delegation of its claims-paying authority, for purposes of subparagraphs (8) and (9) of this paragraph.

B. Termination shall be effected on a cut-off basis and the Subscribing Reinsurer shall have no liability for Loss Occurrences commencing after the date of termination. The reinsurance premium due the Subscribing Reinsurer hereunder (including any minimum reinsurance premium) shall be prorated based on the period of the Subscribing Reinsurer’s participation hereon, and the Subscribing Reinsurer shall immediately return any excess reinsurance premium received. Reinstatement premium, if any, shall be calculated based on the Subscribing Reinsurer’s reinsurance premium earned during the period of the Subscribing Reinsurer’s participation hereon.

C. Additionally, in the event of any of the circumstances listed in paragraph A of this Article, the Company shall have the option to commute the Subscribing Reinsurer’s liability for losses on Policies covered by this Contract. In the event the Company and the Subscribing Reinsurer cannot agree on the commutation amount, they shall appoint an actuary and/or appraiser to assess such amount and shall share equally any expense of the actuary and/or appraiser. If the Company and the Subscribing Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Subscribing Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Subscribing Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties in respect of liability arising from the Subscribing Reinsurer’s participation under this Contract.

D. The Company’s option to require commutation under paragraph C above shall survive the termination or expiration of this Contract.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 7

ARTICLE 6

TERRITORY

This Contract shall apply to Policies issued in the State of Florida.

ARTICLE 7

EXCLUSIONS

A. This Contract shall not apply to and specifically excludes:

1. Flood when written as such.

2. Earthquake for standalone Policies where earthquake is the only named peril.

3. Hail damage to an insured’s growing or standing crops.

4. Reinsurance assumed by the Company under obligatory reinsurance agreements, except intercompany reinsurance between the Company and its affiliates and reinsurance where the Policies involved are to be re-underwritten in accordance with the underwriting standards of the Company and reissued as Policies of the Company in due course.

5. Pools, Associations & Syndicates, per the attached exclusion.

6. Liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any Insolvency Fund. “Insolvency Fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, that provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, that has been declared by any competent authority to be insolvent, or that is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

7. Loss or damage occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, martial law, or confiscation by order of any government or public authority, but not excluding loss or damage that would be covered under a standard form of Policy containing a standard war exclusion clause.

8. Losses excluded by the attached Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance – U.S.A.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 8

9. Terrorism as defined in the attached Terrorism Exclusion.

10. Mold unless directly resulting from an otherwise covered peril.

11. Loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25.0% of the Company’s property loss under the applicable original Policy.

12. Financial guarantee and insolvency.

13. Loss or damage to overhead transmission and distribution lines, including supporting structures, of electrical companies, telephone companies, and cable companies. This exclusion shall not apply, however, to transmission and distribution lines and their supporting structures located on the property of any original insured or within 1,000 feet thereof.

14. Losses excluded by the attached Communicable Disease Exclusion (Property Treaty Reinsurance).

15. Loss Excluded by the attached Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance).

16. Policies written by TypTap Insurance Company.

B. With the exception of subparagraphs A(6), A(7), A(8), A(9), A(12), A(14) and A(15) above, should any judicial, regulatory or legislative entity having legal jurisdiction invalidate any exclusion on the Company's Policy, any amount of loss for which the Company is liable because of such invalidation will not be excluded hereunder.

C. With the exception of subparagraphs A(6), A(7), A(8), A(9), A(12), A(14) and A(15) above, if the Company inadvertently issues a Policy falling within the scope of one or more of the exclusions, such Policy shall be covered hereunder, provided that the Company issues, or causes to be issued, the required notice of cancellation within 30 days after a member of the executive or managerial staff at the Company’s home office having underwriting authority in the class of business involved becomes aware that the Policy applies to excluded classes, unless the Company is prevented from canceling said Policy within such period by applicable statute or regulation, in which case such Policy shall be covered hereunder until the earliest date on which the Company may cancel.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 9

ARTICLE 8

SPECIAL ACCEPTANCE

Business that is not within the scope of this Contract may be submitted to the Reinsurer for special acceptance hereunder, and such business, if accepted by the Reinsurer shall be covered hereunder, subject to the terms and conditions of this Contract, except as modified by the special acceptance. The Reinsurer shall be deemed to have accepted a risk, if it has not responded within five business days after receiving the underwriting information on such risk. Any renewal of a special acceptance agreed to for a predecessor contract to this Contract, shall automatically be covered hereunder.

ARTICLE 9

PREMIUM

A. The Company shall pay the Reinsurer a Deposit Premium of [ ] for the term of this Contract, to be paid in the amount of [ ] on June 1, 2024, September 1, 2024, January 1, 2025, and April 1, 2025.

B. Within 45 days following the expiration of this Contract, the Company shall provide the Reinsurer with a report showing the Company’s final Total Insured Value. The final Total Insured Value shall be multiplied by the Final Adjusted Premium Rate of [ ]. Should this amount be greater than or equal to [ ] and less than or equal to [ ] of the Deposit Premium as set forth above, there shall be no additional or return premium due. Should the amount so calculated exceed [ ] of the Deposit Premium paid in accordance with paragraph A above, the Company shall immediately pay the Reinsurer the difference in excess of [ ] of the Deposit Premium. Should the amount so calculated be less than [ ] of the Deposit Premium paid in accordance with paragraph A of this Article, the Reinsurer shall immediately pay the Company the difference below [ ] of the Deposit Premium, subject to the Minimum Premium of [ ].

C. “Total Insured Value” means the Company’s aggregate wind exposures on September 30, 2024 for business covered hereunder.

D. The estimated Total Insured Value is $44,075,532,874.

E. The Company shall furnish the Reinsurer with such reasonably available information as may be reasonably required by the Reinsurer for completion of the Reinsurer’s financial statements.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 10

ARTICLE 10

REINSTATEMENT

A. Loss payments under this Contract shall reduce the limit of coverage afforded by the amounts paid, but the limit of coverage shall be reinstated from the time of the occurrence of the loss, and for each amount so reinstated, the Company agrees to pay, simultaneously with the Reinsurer’s loss payment, an additional premium calculated at pro rata of the Reinsurer’s premium for the term of this Contract, being pro rata only as to the fraction of the Reinsurer’s limit of liability hereunder (i.e., the fraction of the Reinsurer’s limit of liability for each Loss Occurrence as set forth in the Retention and Limit Article) so reinstated. Nevertheless, the Reinsurer’s liability shall not exceed such limit(s) in respect of any one Loss Occurrence, nor the applicable limit(s) in respect of all Loss Occurrences commencing during the term of this Contract, as set forth in the Retention and Limit Article.

B. If at the time of a loss settlement hereon the reinsurance premium, as calculated in accordance with the Premium Article, is unknown, the above calculation of reinstatement premium shall be based upon the Deposit Premium, subject to adjustment when the reinsurance premium is finally established.

ARTICLE 11

DEFINITIONS

A. 1. “Ultimate Net Loss” means the actual loss paid by the Company or which the Company becomes liable to pay, such loss to include Loss Adjustment Expense, 100% of any Extra Contractual Obligation and 100% of any Loss in Excess of Policy Limits as defined in the Extra Contractual Obligations/Excess of Policy Limits Article. In no event, however, shall more than 25% of “Ultimate Net Loss” for any one Loss Occurrence be comprised of Extra Contractual Obligations and Loss in Excess of Policy Limits.

2. Salvages and all recoveries (including amounts due from all reinsurances that inure to the benefit of this Contract, whether recovered or not), shall be first deducted from such loss to arrive at the amount of liability attaching hereunder.

3. All salvages, recoveries or payments recovered or received subsequent to loss settlement hereunder shall be applied as if recovered or received prior to the aforesaid settlement, and all necessary adjustments shall be made by the parties hereto.

4. The Company shall be deemed to be “liable to pay” a loss when a judgment has been rendered that the Company does not plan to appeal, and/or the Company has obtained a release, and/or the Company has accepted a proof of loss, and/or the Company has made a commitment to pay, and/or the Company has scheduled the payment of a loss.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 11

5. Nothing in this clause shall be construed to mean that losses are not recoverable hereunder until the Company’s “Ultimate Net Loss” has been ascertained.

B. “Loss Adjustment Expense” means costs and expenses incurred by the Company in connection with the investigation, appraisal, adjustment, settlement, litigation, defense or appeal of a specific claim or loss, or alleged loss, including but not limited to:

1. court costs;

2. costs of supersedeas and appeal bonds;

3. monitoring counsel expenses;

4. legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including but not limited to declaratory judgment actions;

5. post-judgment interest;

6. pre-judgment interest, unless included as part of an award or judgment;

7. a pro rata share of salaries and expenses of Company field employees, calculated in accordance with the time occupied in adjusting such loss, and expenses of other Company employees who have been temporarily diverted from their normal and customary duties and assigned to the field adjustment of losses covered by this Contract; and

8. subrogation, salvage and recovery expenses.

“Loss Adjustment Expense” does not include salaries and expenses of the Company’s employees, except as provided in subparagraph (7) above, and office and other overhead expenses.

C. 1. “Loss Occurrence” means the sum of all individual losses directly occasioned by any one disaster, accident or loss or series of disasters, accidents or losses arising out of one event. However, the duration and extent of any one “Loss Occurrence” shall be limited to all individual losses sustained by the Company occurring during any period of 168 consecutive hours arising out of and directly occasioned by the same event except that the term “Loss Occurrence” shall be further defined as follows:

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 12

that merges with a “Named Storm” shall be considered part of that “Named Storm,” once it has merged. A “Named Storm” shall be deemed to begin at the effective time and date of the first watch, warning or other official advisory applicable to such tropical storm or hurricane issued by the above referenced governmental meteorological agencies. A “Named Storm” shall be deemed to end 72 hours after the cancellation of the last watch, warning or other official advisory applicable to such tropical storm, hurricane or successor, issued by the above referenced governmental meteorological agencies irrespective of the duration of the timing or spacing between such watches, warnings or other official advisories. If two or more storms are assigned different names by the above referenced governmental meteorological agencies, each of those storms shall constitute a separate event for purposes of this definition.

b. As regards windstorm, hail, tornado, cyclone, including ensuing collapse and water damage other than “Named Storm,” all individual losses sustained by the Company occurring during any period of 96 consecutive hours arising out of and directly occasioned by the same event.

c. As regards riot, riot attending a strike, civil commotion, vandalism and malicious mischief, all individual losses sustained by the Company occurring during any period of 96 consecutive hours arising out of and directly occasioned by the same event. The maximum duration of 96 consecutive hours may be extended in respect of individual losses that occur beyond such 96 consecutive hours during the continued occupation of an assured’s premises by strikers, provided such occupation commenced during the aforesaid period.

d. As regards earthquake and fire following directly occasioned by the earthquake, those earthquake losses and individual fire losses that commence during the period of 168 consecutive hours may be included in the Company’s “Loss Occurrence.”

e. As regards any related weather conditions involving snow, sleet, freezing rain, freeze, ice, winter weather, and wind losses related to such conditions, all individual losses sustained by the Company, that occur during any period of 168 consecutive hours arising out of and directly occasioned by the same event.

f. As regards firestorms, brush fires and other fires or series of fires, irrespective of origin (except for fires covered in subparagraphs (c) and (d) above) which spread through trees, grassland or other vegetation, all individual losses sustained by the Company occurring during any period of 168 consecutive hours within a 150-mile radius of any fixed point selected by the Company may be included in the Company’s “Loss Occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “Loss Occurrence.”

2. Except as provided in subparagraph (1)(a) above:

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a. The Company may choose the date and time when any such period of consecutive hours commences provided that it is not earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.

b. Only one period of consecutive hours shall apply with respect to one event, except that, as respects those “Loss Occurrences” referred to in subparagraph (1)(c) above, if the disaster, accident or loss occasioned by the event is of greater duration than 96 consecutive hours, then the Company may divide that disaster, accident or loss into two or more “Loss Occurrences” provided no two periods overlap and no individual loss is included in more than one such period and provided that no period commences earlier than the date and time of the occurrence of the first recorded individual loss sustained by the Company arising out of that disaster, accident or loss.

3. Losses arising from a combination of two or more perils as a result of the same event shall be considered as having arisen from one “Loss Occurrence.” Furthermore, all losses arising from an event involving a combination of losses described in subparagraphs (1)(a) and (1)(b) may be considered as having arisen from one “Loss Occurrence.” Notwithstanding the foregoing, the hourly limitations as stated above shall not be exceeded as respects the applicable perils, and, except as respects those “Loss Occurrences” involving a “Named Storm” referred to in subparagraph (1)(a) above, no single “Loss Occurrence” shall encompass a time period greater than 168 consecutive hours.

D. “Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the Company.

ARTICLE 12

EXTRA CONTRACTUAL OBLIGATIONS/EXCESS OF POLICY LIMITS

A. This Contract shall cover Extra Contractual Obligations, as provided in the definition of Ultimate Net Loss. “Extra Contractual Obligations” shall be defined as those liabilities not covered under any other provision of this Contract and that arise from the handling of any claim on business covered hereunder, such liabilities arising because of, but not limited to, the following: failure by the Company to settle within the Policy limit, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action.

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to settle within the Policy limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action.

C. An Extra Contractual Obligation and/or Loss in Excess of Policy Limits shall be deemed to have occurred on the same date as the loss covered under the Company’s Policy, and shall constitute part of the original loss.

D. For the purposes of the Loss in Excess of Policy Limits coverage hereunder, the word “Loss” shall mean any amounts for which the Company would have been contractually liable to pay had it not been for the limit of the original Policy.

E. Loss Adjustment Expense in respect of Extra Contractual Obligations and/or Loss in Excess of Policy Limits shall be covered hereunder in the same manner as other Loss Adjustment Expense.

F. However, this Article shall not apply where the loss has been incurred due to final legal adjudication of fraud of a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder.

G. In no event shall coverage be provided to the extent not permitted under law.

ARTICLE 13

NET RETAINED LIABILITY

A. This Contract applies only to that portion of any loss that the Company retains net for its own account (prior to deduction of any reinsurance that inures solely to the benefit of the Company).

B. The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts that may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

ARTICLE 14

ORIGINAL CONDITIONS

All reinsurance under this Contract shall be subject to the same terms, conditions, waivers and interpretations, and to the same modifications and alterations as the respective Policies of the

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Company. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

ARTICLE 15

NO THIRD PARTY RIGHTS

This Contract is solely between the Company and the Reinsurer, and in no instance shall any insured, claimant or other third party have any rights under this Contract except as may be expressly provided otherwise herein.

ARTICLE 16

NOTICE OF LOSS AND LOSS SETTLEMENTS

A. The Company shall advise the Reinsurer promptly if paid and estimated Ultimate Net Loss is in excess of 75% of the Company’s retention, or if, in the opinion of the Company, such Ultimate Net Loss may result in a claim hereunder. Thereafter, the Company shall advise the Reinsurer, at least monthly, of all subsequent developments thereto that may materially affect the position of the Reinsurer.

B. The Company alone and at its full discretion shall adjust, settle or compromise all claims and losses.

C. As respects losses subject to this Contract, all loss settlements made by the Company, whether under strict Policy terms or by way of compromise, and any Extra Contractual Obligations and/or Loss in Excess of Policy Limits, shall be binding upon the Reinsurer. The Reinsurer agrees to pay or allow, as the case may be, its share of each such settlement immediately upon receipt of reasonable evidence of the amount paid by the Company or that the Company estimates it will pay within the next 14 days. Within 30 days after receipt of the Reinsurer’s payment, the Company shall report to the Reinsurer the Reinsurer’s payment, minus the Reinsurer’s share of losses subject to this Contract that the Company has paid, or become liable to pay, as of the date of the report. Any positive difference shall be remitted to the Reinsurer with the Company’s report.

ARTICLE 17

LATE PAYMENTS

A. In the event any payment due either party is not received by the Intermediary by the payment due date, the party to whom payment is due may, by notifying the Intermediary in writing, require the debtor party to pay, and the debtor party agrees to pay, an interest penalty on the amount past due calculated for each such payment on the last business day of each month as follows:

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1. The number of full days that have expired since the overdue date or the last monthly calculation, whichever the lesser; times

2. 1/365th of the sum of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made, plus 1%; times

3. The amount past due, including accrued interest.

Interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

B. The due date shall, for purposes of this Article, be determined as follows:

1. Payments from the Reinsurer to the Company shall be due on the date on which the demand for payment (including delivery of bordereaux or quarterly or monthly reports) is received by the Reinsurer, and shall be overdue 30 days thereafter.

2. Payments from the Company to the Reinsurer shall be due on the dates specified within this Contract. Payments shall be overdue 30 days thereafter except for the first installment of premium, if applicable, which shall be overdue 60 days from inception or 30 days from final line-signing, whichever the later. Reinstatement premium, if applicable, shall have as a due date the date when the Company receives payment for the claim giving rise to such reinstatement premium, and payment shall be overdue 30 days thereafter. In the event a due date is not specifically stated for a given payment, the overdue date shall be 30 days following the date of billing.

C. If the information contained in the Company’s demand for payment is insufficient or not in accordance with the conditions of this Contract, then within 30 days the Reinsurer shall request from the Company all additional information necessary to validate its claim and the payment due date as defined in paragraph B shall be deemed to be the date upon which the Reinsurer received the requested additional information. This paragraph is only for the purpose of establishing when a payment is overdue, and shall not alter the provisions of the Notice of Loss and Loss Settlements Article or other pertinent contractual stipulations.

D. In the event arbitration is necessary to settle a dispute, the panel shall have the authority to make a determination awarding interest to the prevailing party. Interest, if any, awarded by the panel shall supersede the interest amounts outlined herein.

E. Any interest owed pursuant to this Article may be waived by the party to which it is owed. Waiver of such interest, however, shall not affect the waiving party’s rights to other interest amounts due as a result of this Article.

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ARTICLE 18

OFFSET

Each party hereto shall have, and may exercise at any time and from time to time, the right to offset any and all balances due from a party to the other arising under this Contract. In the event of the insolvency of a party hereto, offsets shall only be allowed in accordance with the provisions of any applicable law governing offset entitlement.

ARTICLE 19

CURRENCY

A. Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars, and all payments hereunder shall be in United States Dollars.

B. For purposes of this Contract, where the Company receives premiums or pays losses in currencies other than United States Dollars, such premiums or losses shall be converted into United States Dollars at the actual rates of exchange at which these premiums or losses are entered in the Company’s books.

ARTICLE 20

UNAUTHORIZED REINSURANCE

A. This Article applies:

1. only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, or

2. to a Subscribing Reinsurer qualified as a reciprocal jurisdiction reinsurer with any such insurance regulatory authority in the event such Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, in which case such Subscribing Reinsurer shall fund 100% of its share of the Reinsurer’s Obligations as hereinafter provided.

B. The Company agrees, in respect of its Policies or bonds falling within the scope of this Contract, that when it files with its insurance regulatory authority, or sets up on its books liabilities as required by law, it shall forward to the Reinsurer a statement showing the proportion of such liabilities applicable to the Reinsurer. The “Reinsurer’s Obligations” shall be defined as follows:

1. unearned premium (if applicable);

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2. known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;

3. losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;

4. losses incurred but not reported and Loss Adjustment Expense relating thereto;

5. all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.

C. The Reinsurer’s Obligations shall be funded by funds withheld, cash advances, Trust Agreement or a Letter of Credit (LOC). The Reinsurer shall have the option of determining the method of funding provided it is acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves.

D. When funding by Trust Agreement, the Reinsurer shall ensure that the Trust Agreement complies with the provisions of the “Trust Agreement Requirements Clause” attached hereto. When funding by a LOC, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional LOC issued by a bank and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s Obligations. Such LOC shall be issued for a period of not less than one year, and shall be automatically extended for one year from its date of expiration or any future expiration date unless 30 days (or such other time period as may be required by insurance regulatory authorities), prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the LOC extended for any additional period.

E. The Reinsurer and the Company agree that any funding provided by the Reinsurer pursuant to the provisions of this Contract may be drawn upon at any time, notwithstanding any other provision of this Contract, and be utilized by the Company or any successor, by operation of law, of the Company including, without limitation, any liquidator, rehabilitator, receiver or conservator of the Company, for the following purposes, unless otherwise provided for in a separate Trust Agreement:

1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;

2. to make refund of any sum that is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement);

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the Reinsurer. Any taxes payable on accrued interest shall be paid out of the assets in the account that are in excess of the Reinsurer’s Obligations (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement). If the assets are inadequate to pay taxes, any taxes due shall be paid or reimbursed by the Reinsurer;

4. to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

F. If the amount drawn by the Company is in excess of the actual amount required for subparagraph E(1) or E(3), or in the case of subparagraph E(4), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.

G. The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.

H. At annual intervals, or more frequently at the discretion of the Company, but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations for the sole purpose of amending the LOC or other method of funding, in the following manner:

1. If the statement shows that the Reinsurer’s Obligations exceed the balance of the LOC, as of the statement date, the Reinsurer shall, within 30 days after receipt of the statement, secure delivery to the Company of an amendment to the LOC increasing the amount of credit by the amount of such difference. Should another method of funding be used, the Reinsurer shall, within the time period outlined above, increase such funding by the amount of such difference.

2. If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of the LOC (or that 102% of the Reinsurer’s Obligations are less than the trust account balance if funding is provided by a Trust Agreement), as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the LOC reducing the amount of credit available by the amount of such excess credit. Should another method of funding be used, the Company shall, within the time period outlined above, decrease such funding by the amount of such excess.

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ARTICLE 21

TAXES

A. In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction of the premium hereon when making Canadian tax returns or when making tax returns, other than Income or Profits Tax returns, to any state or territory of the United States of America or to the District of Columbia.

B. 1. Each Subscribing Reinsurer has agreed to allow, for the purpose of paying the Federal Excise Tax, the applicable percentage of the premium payable hereon (as imposed under the Internal Revenue Code) to the extent such premium is subject to Federal Excise Tax.

2. In the event of any return of premium becoming due hereunder, the Subscribing Reinsurer shall deduct the applicable percentage of the premium from the amount of the return, and the Company or its agent should take steps to recover the Tax from the U.S. Government.

ARTICLE 22

ACCESS TO RECORDS

A. The Reinsurer or its duly authorized representatives shall have the right to visit the offices of the Company to inspect, examine, audit, and verify any of the policy, accounting or claim files (“Records”) relating to business reinsured under this Contract during regular business hours after giving five working days’ prior notice. This right shall be exercisable during the term of this Contract or after the expiration of this Contract. Notwithstanding the above, the Reinsurer shall not have any right of access to the Records of the Company if it is not current in all undisputed payments due the Company.

B. Notwithstanding the above, the Company reserves the right to withhold from the Reinsurer any Privileged Documents. However, the Company shall permit and not object to the Reinsurer’s access to Privileged Documents in connection with the underlying claim reinsured hereunder following final settlement or final adjudication of the case or cases involving such claim, with prejudice against all claimants and all parties to such adjudications; the Company may defer release of such Privileged Documents if there are subrogation, contribution, or other third party actions with respect to that claim or case, and the Company’s defense might be jeopardized by release of such Privileged Documents. In the event that the Company seeks to defer release of such Privileged Documents, it shall, in consultation with the Reinsurer, take other steps as reasonably necessary to provide the Reinsurer with the information it reasonably requires to indemnify the Company without causing a loss of such privileges or protections. The Reinsurer shall not have access to Privileged Documents relating to any dispute between the Company and the Reinsurer.

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C. For purposes of this Article:

1. “Privileged Documents” means any documents that are Attorney-Client Privilege Documents and/or Work Product Privilege Documents.

2. “Attorney-Client Privilege Documents” means communications of a confidential nature between (a) the Company, or anyone retained by or at the direction of the Company, or its in‑house or outside legal counsel, or anyone in the control of such legal counsel, and (b) any in-house or outside legal counsel, if such communications relate to legal advice being sought by the Company and/or contain legal advice being provided to the Company.

3. “Work Product Privilege Documents” means communications, written materials and tangible things prepared by or for in-house or outside counsel, or prepared by or for the Company, in anticipation of or in connection with litigation, arbitration, or other dispute resolution proceedings.

ARTICLE 23

CONFIDENTIALITY

A. The Reinsurer hereby acknowledges that the documents, information and data provided to it by the Company, whether directly or through an authorized agent, in connection with the placement and execution of this Contract (“Confidential Information”) are proprietary and confidential to the Company. Confidential Information shall not include documents, information or data that the Reinsurer can show:

1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;

2. have been rightfully received from a third person without obligation of confidentiality; or

3. were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

B. Absent the written consent of the Company, the Reinsurer shall not disclose any Confidential Information to any third parties, including any affiliated companies (except to the extent necessary to enable affiliated companies or third parties engaged by the Reinsurer to perform services related to this Contract on behalf of the Reinsurer), except:

1. when required by retrocessionaires as respects business ceded to this Contract;

2. when required by regulators performing an audit of the Reinsurer’s records and/or financial condition; or

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3. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business.

Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract.

C. Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.

D. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.

ARTICLE 24

INDEMNIFICATION AND ERRORS AND OMISSIONS

A. The Reinsurer is reinsuring, subject to the terms and conditions of this Contract, the obligations of the Company under any Policy. The Company shall be the sole judge as to:

1. what shall constitute a claim or loss covered under any Policy;

2. the Company’s liability thereunder; and

3. the amount or amounts that it shall be proper for the Company to pay thereunder.

B. The Reinsurer shall be bound by the judgment of the Company as to the obligation(s) and liability(ies) of the Company under any Policy.

C. Any inadvertent error, omission or delay in complying with the terms and conditions of this Contract shall not be held to relieve either party hereto from any liability that would attach to it hereunder if such error, omission or delay had not been made, provided such error, omission or delay is rectified immediately upon discovery.

D. Nothing in this Article shall be construed to override any of the other terms and conditions of this Contract.

ARTICLE 25

INSOLVENCY

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any company covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary state of any company covered hereunder, that domiciliary state’s laws shall prevail.

B. In the event of the insolvency of the Company, this reinsurance (or the portion of any risk or obligation assumed by the Reinsurer, if required by applicable law) shall be payable directly to the Company, or to its liquidator, receiver, conservator or statutory successor, either: (1) on the basis of the liability of the Company, or (2) on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute, without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim against the Company indicating the Policy or bond reinsured, which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

C. Where two or more reinsurers are involved in the same claim and a majority in interest elect to interpose defense to such claim, the expense shall be apportioned in accordance with the terms of this reinsurance Contract as though such expense had been incurred by the Company.

D. As to all reinsurance made, ceded, renewed or otherwise becoming effective under this Contract, the reinsurance shall be payable as set forth above by the Reinsurer to the Company or to its liquidator, receiver, conservator or statutory successor, (except as provided by Section 4118(a)(1)(A) of the New York Insurance Law, provided the conditions of 1114(c) of such law have been met, if New York law applies) or except (1) where the Contract specifically provides another payee in the event of the insolvency of the Company, or (2) where the Reinsurer, with the consent of the direct insured or insureds, has assumed such Policy obligations of the Company as direct obligations of the Reinsurer to the payees under such Policies and in substitution for the obligations of the Company to such payees. Then, and in that event only, the Company, with the prior approval of the certificate of assumption on New York risks by the Superintendent of Financial Services of the State of New York, or with the prior approval of such other regulatory authority as may be applicable, is entirely released from its obligation and the Reinsurer shall pay any loss directly to payees under such Policy.

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ARTICLE 26

RUN-OFF REINSURER

A. “Run-off Reinsurer” means any Subscribing Reinsurer that:

1. has been ordered by a state insurance department or other legal authority to cease writing business, or has been placed under regulatory supervision or in rehabilitation; or

2. has ceased reinsurance underwriting operations; or

3. has transferred or delegated its claims-paying authority to an unaffiliated entity; or

4. engages in a process of Scheme of Arrangement or similar procedure related to this Contract, including but not limited to an insurance business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000 (U.K.), as may be amended from time to time; or

5. in any other way has assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

B. Notwithstanding any other provision of this Contract, in the event that a Subscribing Reinsurer becomes a Run-off Reinsurer at any time, the Company may elect, by giving written notice to the Run-off Reinsurer at any time thereafter, that all or any of the following shall apply to the Run-off Reinsurer’s participation hereunder:

1. Should the Run-off Reinsurer fail to pay amounts due hereunder, the interest penalty specified in the Late Payments Article shall be increased by 0.5% for each 30 days that a payment is past due, subject to a maximum increase of 7.0%.

2. The Run-off Reinsurer’s liability for losses for Policies covered by this Contract shall be commuted. In the event the Company and the Run-off Reinsurer cannot agree on the commutation amount of the Run-off Reinsurer’s liability under such Policies, they shall appoint an actuary and/or appraiser to assess such liability and shall share equally any expense of the actuary and/or appraiser. If the Company and the Run-off Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Run-off Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Run-off Reinsurer of the

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amount of liability ascertained shall constitute a complete and final release of both parties under this Contract.

3. The Run-off Reinsurer shall have no right of access to the Records of the Company if the Run-off Reinsurer has denied payment of any claim hereunder or there is a pending arbitration between the Company and the Run-off Reinsurer regarding any claim hereunder. A reservation of rights shall be considered a denial of a claim. Notwithstanding the above, the Run-off Reinsurer shall continue to have access to Records of the Company for any claim for which it has raised a query within 30 days of its receipt of a billing, but any inspection of Records must be completed within 90 days of receipt of billing or access will be deemed waived.

4. The provisions of the Arbitration Article shall not apply.

C. The Company’s waiver of any rights provided in this Article is not a waiver of that right or other rights at a later date.

ARTICLE 27

ARBITRATION

A. Any dispute arising out of the interpretation, performance or breach of this Contract, including the formation or validity thereof, shall be submitted for decision to a panel of three arbitrators. Notice requesting arbitration shall be in writing and sent certified or registered mail, return receipt requested.

B. One arbitrator shall be chosen by each party and the two arbitrators shall then choose an impartial third arbitrator who shall preside at the hearing. If either party fails to appoint its arbitrator within 30 days after being requested to do so by the other party, the latter, after 10 days’ prior notice by certified or registered mail of its intention to do so, may appoint the second arbitrator.

C. If the two arbitrators do not agree on a third arbitrator within 60 days of their appointment, the third arbitrator shall be chosen in accordance with the procedures for selecting the third arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS). The arbitrators shall be persons knowledgeable about insurance and reinsurance who have no personal or financial interest in the result of the arbitration. If a member of the panel dies, becomes disabled or is otherwise unwilling or unable to serve, a substitute shall be selected in the same manner as the departing member was chosen and the arbitration shall continue.

D. Within 30 days after all arbitrators have been appointed, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules of hearings.

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E. The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence. Notwithstanding anything to the contrary in this Contract, the arbitrators may at their discretion, consider underwriting and placement information provided by the Company to the Reinsurer, as well as any correspondence exchanged by the parties that is related to this Contract. The arbitration shall take place in Tampa, Florida, or at such other place as the parties shall agree. The decision of any two arbitrators shall be in writing and shall be final and binding. The panel is empowered to grant interim relief as it may deem appropriate.

F. The panel shall interpret this Contract as an honorable engagement rather than as merely a legal obligation and shall make its decision considering the custom and practice of the applicable insurance and reinsurance business as promptly as possible after the hearings. Judgment upon an award may be entered in any court having jurisdiction thereof.

G. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator. The remaining costs of the arbitration shall be allocated by the panel. The panel may, at its discretion, award such further costs and expenses as it considers appropriate, including but not limited to attorneys’ fees, to the extent permitted by law.

ARTICLE 28

EXPEDITED ARBITRATION

A. Notwithstanding the provisions of the Arbitration Article, in the event an amount in dispute hereunder $1,000,000 or less, the parties will submit to an expedited arbitration process with the use of a single arbitrator. The arbitrator will be chosen in accordance with the procedures for selecting an arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society - U.S. (ARIAS).

B. Each party’s case will be submitted to the arbitrator within 100 calendar days of the date of determination of the arbitrator. Discovery will be limited to exchanging only those documents directly relating to the issue in dispute, subject to a limit of two discovery depositions from each party, unless otherwise authorized by the arbitrator upon a showing of good cause.

C. Within 120 calendar days of the date of determination of the arbitrator, the hearing will be completed and a written award will be issued by the arbitrator. As the parties agree that time is of the essence, the sole arbitrator does not have the authority to lengthen the schedule, absent agreement of both parties. The arbitrator will have all the powers conferred on the arbitration panel as provided in the Arbitration Article, and said Article will apply to all matters not specifically addressed above.

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ARTICLE 29

SERVICE OF SUIT

A. This Article applies only to those Subscribing Reinsurers not domiciled in the United States of America, and/or not authorized in any state, territory and/or district of the United States of America where authorization is required by insurance regulatory authorities.

B. This Article shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.

C. In the event of the failure of the Reinsurer to perform its obligations hereunder, the Reinsurer, at the request of the Company, shall submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this Article constitutes or should be understood to constitute a waiver of the Reinsurer’s rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Reinsurer, once the appropriate court is selected, whether such court is the one originally chosen by the Company and accepted by the Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against the Reinsurer upon this Contract, shall abide by the final decision of such court or of any appellate court in the event of an appeal.

D. Service of process in such suit may be made upon:

1. as respects Underwriting Members of Lloyd’s, London: Lloyd’s America, Inc., Attention: Legal Department, 280 Park Avenue, East Tower, 25th Floor, New York, New York 10017;

2. as respects any other Subscribing Reinsurer: Messrs. Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, or another party specifically designated in the Subscribing Reinsurer’s Interests and Liabilities Agreement attached hereto.

The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.

E. Further, pursuant to any statute of any state, territory or district of the United States that makes provision therefor, the Reinsurer hereby designates the Superintendent, Commissioner or Director of Insurance, or other officer specified for that purpose in the statute, or his successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Company or any beneficiary hereunder arising out of this Contract, and hereby

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 28

designates the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.

ARTICLE 30

GOVERNING LAW

This Contract shall be governed as to performance, administration and interpretation by the laws of the State of Florida, exclusive of conflict of law rules. However, with respect to credit for reinsurance, the rules of all applicable states shall apply.

ARTICLE 31

ENTIRE AGREEMENT

This Contract sets forth all of the duties and obligations between the Company and the Reinsurer and supersedes any and all prior or contemporaneous written agreements with respect to matters referred to in this Contract. This Contract may not be modified or changed except by an amendment to this Contract in writing signed by both parties. However, this Article shall not be construed as limiting the admissibility of evidence regarding the formation, interpretation, purpose or intent of this Contract.

ARTICLE 32

NON-WAIVER

The failure of the Company or the Reinsurer to insist on compliance with this Contract or to exercise any right or remedy hereunder shall not constitute a waiver of any rights contained in this Contract nor prevent either party from thereafter demanding full and complete compliance nor prevent either party from exercising such remedy in the future.

ARTICLE 33

SANCTION LIMITATION AND EXCLUSION CLAUSE

No (re)insurer shall be deemed to provide cover and no (re)insurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that (re)insurer to any sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 29

ARTICLE 34

INTERMEDIARY

Guy Carpenter & Company, LLC, is hereby recognized as the Intermediary negotiating this Contract for all business hereunder. All communications (including notices, statements, premiums, return premiums, commissions, taxes, losses, Loss Adjustment Expenses, salvages, and loss settlements) relating thereto shall be transmitted to the Company or the Reinsurer through the Intermediary. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Company only to the extent that such payments are actually received by the Company.

ARTICLE 35

MODE OF EXECUTION

A. This Contract may be executed by:

1. an original written ink signature of paper documents;

2. an exchange of facsimile copies showing the original written ink signature of paper documents;

3. electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person’s handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.

B. The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract. This Contract may be executed in one or more counterparts, each of which, when duly executed, shall be deemed an original.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 30

IN WITNESS WHEREOF, the Company has caused this Contract to be executed by its duly authorized representative(s), who also confirms the Company’s review of and agreement to be bound by the terms and conditions of the Interests and Liabilities Agreements attached to and forming part of this Contract, this _____ day of __________, in the year of ______.

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Signature: Title:

Print Name:

UNDERLYING SECOND LAYER PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 31

POOLS, ASSOCIATIONS & SYNDICATES EXCLUSIONS CLAUSE

Section A:

This Contract excludes:

a. All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.

b. Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property, whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

1. This Contract excludes business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in, any Pool, Association or Syndicate, whether by way of insurance or reinsurance, formed for the purpose of writing any of the following:

Oil, Gas or Petro-Chemical Plants

Oil or Gas Drilling Rigs and/or

Aviation Risks

2. The exclusion under paragraph 1 of this Section B does not apply:

a. Where the Total Insured Value over all interests of the risk in question is less than $250,000,000.

b. To interests traditionally underwritten as Inland Marine and/or Stock and/or Contents written on a Blanket basis.

c. To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under subparagraph (a).

Section C:

1. Nevertheless the Reinsurer specifically agrees that liability accruing to the Company from its participation in Residual Market Mechanisms, including but not limited to the following, for all perils otherwise protected hereunder shall not be excluded herefrom:

a. So-called “Beach and Windstorm Plans” and so-called “Coastal Pools”;

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 32

b. All “FAIR Plan” and “Rural Risk Plan” business;

c. Louisiana Citizens Property Insurance Corporation;

d. California Earthquake Authority (“CEA”) or any similar entity.

Notwithstanding the above, assessments related to the Florida Hurricane Catastrophe Fund, Reinsurance to Assist Policyholders, and Citizens Property Insurance Corporation (Florida) shall be excluded hereunder.

2. However, this reinsurance does not include any increase in such liability resulting from:

a. The inability of any other participant in such Residual Market Mechanisms to meet its liability;

b. Any claim against a Residual Market Mechanism or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Exclusions Article);

c. Any assessment or surcharge levied on the policyholder and therefore not a liability of the Company;

d. The Company’s initial capital contribution to the CEA;

e. Any assessments, other than interim and regular assessments, from a Residual Market Mechanism included in subparagraph 1(c) above;

f. Any expenditure to purchase or retire bonds.

3. The Company may include in Ultimate Net Loss for any Loss Occurrence covered hereunder only the liability attributable to that Loss Occurrence. If the relevant entity does not specify what portion of an assessment is attributable to each Loss Occurrence, the Company may include in Ultimate Net Loss in respect of each Loss Occurrence a percentage of the Company’s assessments from the relevant entity related to the calendar year in which the Loss Occurrence commenced, regardless of when assessed, such percentage to be determined by dividing the relevant entity’s losses arising from the Loss Occurrence by its total losses for the calendar year.

4. The Company will deduct from Ultimate Net Loss amounts received as recoupment of any assessment that has been included in the Ultimate Net Loss, provided the recoupment is directly allocable to the assessment (“itemized recoupment”). The Company shall use commercially reasonable efforts to recoup such assessment. Any amount received as an itemized recoupment of any assessment (whether under this Contract or any predecessor contract), and therefore deductible from Ultimate Net Loss, shall not be included in the subject premium of this Contract.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 33

However, if a state levies assessments but does not allow itemized recoupment from policyholders, instead allowing the Company to file an overall increased rate, any such premium increased thereby shall not be deemed to be a recoupment that is deductible from Ultimate Net Loss. Any recoupment received as part of a general premium rate increase, not specifically itemized, shall be included as part of the subject premium of this Contract or a successor contract, as applicable.

NOTES: Wherever used herein the terms:

“Company” shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.

“Contract” shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.

“Reinsurer” shall be understood to mean “Reinsurer,” “Reinsurers,” “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 34

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - U.S.A.

1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

2. Without in any way restricting the operation of paragraph (1) of this clause, this Reinsurance does not cover any loss or liability accruing to the Reassured, directly or indirectly and whether as Insurer or Reinsurer, from any insurance against Physical Damage (including business interruption or consequential loss arising out of such Physical Damage) to:

I. Nuclear reactor power plants including all auxiliary property on the site, or

II. Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or

III. Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material”, and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or

IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

3. Without in any way restricting the operations of paragraphs (1) and (2) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, from any insurance on property which is on the same site as a nuclear reactor power plant or other nuclear installation and which normally would be insured therewith except that this paragraph (3) shall not operate

(a) where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

(b) where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 35

5. It is understood and agreed that this clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.

6. The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.

7. Reassured to be sole judge of what constitutes:

(a) substantial quantities, and

(b) the extent of installation, plant or site.

Note: Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a) all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

(b) with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57

NMA 1119

NOTES: Wherever used herein the terms:

“Reassured” shall be understood to mean “Company”, “Reinsured”, “Reassured” or whatever other term is used in the attached reinsurance document to designate the reinsured company or companies.

“Agreement” shall be understood to mean “Agreement”, “Contract”, “Policy” or whatever other term is used to designate the attached reinsurance document.

“Reinsurers” shall be understood to mean “Reinsurers”, “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 36

TERRORISM EXCLUSION

A. Notwithstanding any provision to the contrary within this Contract or any endorsement thereto, it is agreed that this Contract excludes loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any Act of Terrorism, as defined herein, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

B. An “Act of Terrorism” includes any act, or preparation in respect of action, or threat of action designed to influence the government de jure or de facto of any nation or any political division thereof, or in pursuit of political, religious, ideological, or similar purposes to intimidate the public or a section of the public of any nation by any person or group(s) of persons whether acting alone or on behalf of or in connection with any organization(s) or government(s) de jure or de facto, and which:

a. involves violence against one or more persons; or

b. involves damage to property; or

c. endangers life other than that of the person committing the action; or

d. creates a risk to health or safety of the public or a section of the public; or

e. is designed to interfere with or to disrupt an electronic system.

C. This Contract also excludes loss, damage, cost, or expense directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with any action in controlling, preventing, suppressing, retaliating against, or responding to any Act of Terrorism.

D. Notwithstanding the above and subject otherwise to the terms, conditions, and limitations of this Contract, in respect only of personal lines, this Contract shall pay actual loss or damage (but not related cost or expense) caused by any Act of Terrorism, provided such act is not directly or indirectly caused by, contributed to by, resulting from, or arising out of or in connection with biological, chemical, radiological or nuclear pollution or contamination.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 37

LIMITED COMMUNICABLE DISEASE EXCLUSION (PROPERTY TREATY REINSURANCE)

1. Notwithstanding any provision to the contrary within this reinsurance agreement, this reinsurance agreement excludes any loss, damage, liability, claim, cost or expense of whatsoever nature, directly or indirectly caused by, contributed to by, resulting from, arising out of, or in connection with a Communicable Disease or the fear or threat (whether actual or perceived) of a Communicable Disease regardless of any other cause or event contributing concurrently or in any other sequence thereto.

2. Subject to the other terms, conditions and exclusions contained in this reinsurance agreement, this reinsurance agreement will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly caused by or arising from any of the following perils: fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, rainstorm, hail, tornado, cyclone, typhoon, hurricane, earthquake, seaquake, seismic and/or volcanic disturbance/eruption, tsunami, flood, freeze, ice storm, weight of snow or ice, avalanche, meteor/asteroid impact, landslip, landslide, mudslide, bush fire, forest fire, riot, riot attending a strike, civil commotion, vandalism and malicious mischief.

Definitions

3. Communicable Disease means any disease which can be transmitted by means of any substance or agent from any organism to another organism where:

3.1. the substance or agent includes, but is not limited to, a virus, bacterium, parasite or other organism or any variation thereof, whether deemed living or not, and

3.2. the method of transmission, whether direct or indirect, includes but is not limited to, airborne transmission, bodily fluid transmission, transmission from or to any surface or object, solid, liquid or gas or between organisms, and

3.3. the disease, substance or agent can cause or threaten damage to human health or human welfare or can cause or threaten damage to, deterioration of, loss of value of, marketability of or loss of use of property.

4. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.

LMA5503

15 May 2020

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 38

CYBER LOSS LIMITED EXCLUSION CLAUSE (PROPERTY TREATY REINSURANCE)

1. Notwithstanding any provision to the contrary within this reinsurance agreement or any endorsement thereto, this reinsurance agreement excludes all loss, damage, liability, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with:

1.2. any loss of, alteration of, or damage to or a reduction in the functionality, availability or operation of a Computer System, unless subject to the provisions of paragraph 2;

1.3. any loss of use, reduction in functionality, repair, replacement, restoration or reproduction of any Data, including any amount pertaining to the value of such Data.

fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow

Definitions

3. Computer System means any computer, hardware, software, communications system, electronic device (including, but not limited to, smart phone, laptop, tablet, wearable device), server, cloud or microcontroller including any similar system or any configuration of the aforementioned and including any associated input, output, data storage device, networking equipment or back up facility.

4. Data means information, facts, concepts, code or any other information of any kind that is recorded or transmitted in a form to be used, accessed, processed, transmitted or stored by a Computer System.

5. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.

LMA5410

06 March 2020

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 39

TRUST AGREEMENT REQUIREMENTS CLAUSE

A. Except as provided in paragraph B of this Clause, if the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:

1. Requires the Reinsurer to establish a trust account for the benefit of the Company, and specifies what the Trust Agreement is to cover;

2. Stipulates that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash (United States legal tender), and certificates of deposit (issued by a United States bank and payable in United States legal tender), or any combination of the two, provided that the investments are issued by an institution that is not the parent, subsidiary or affiliate of either the Reinsurer or the Company;

3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the Company, or the trustee upon the direction of the Company, may whenever necessary negotiate these assets without consent or signature from the Reinsurer or any other entity;

4. Requires that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent; and

5. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the Company or the Reinsurer.

B. If a ceding insurer is domiciled in California and the Reinsurer satisfies its funding obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:

1. Provides that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States financial institution as defined in California Insurance Code Section 922.7(a) and payable in United States dollars, and investments permitted by the California Insurance Code, or any combination of the above.

2. Provides that investments in or issued by an entity controlling, controlled by or under common control with either the grantor or the beneficiary of the trust shall not exceed 5% of total investments.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 40

3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, whenever necessary, negotiate these assets without consent or signature from the Reinsurer or any other entity.

4. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the ceding insurer or the Reinsurer.

C. If there are multiple ceding insurers that collectively comprise the Company, “regulatory authorities” as referenced in subparagraph A(2) above, shall mean the individual ceding insurer’s domestic regulator.

Effective: June 1, 2024 DOC: June 17, 2024

U8GR000U 41

EX-10.11 5 hci-ex10_11.htm EX-10.11 EX-10.11

EXHIBIT 10.11. Certain identified information has been excluded from this exhibit because it is immaterial and would be competitively harmful if publicly disclosed. Information that has been omitted is indicated with brackets.

EXHIBIT 10.11SECOND LAYER REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 1


SECOND LAYER REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT TABLE OF CONTENTS
Article		Page

	Preamble	3
1	Business Covered	3
2	Coverage	3
3	Term	4
4	Special Termination	4
5	Territory	5
6	Exclusions	5
7	Premium	5
8	Definitions	6
9	Original Conditions	6
10	No Third Party Rights	7
11	Notice of Loss and Loss Settlements	7
12	Late Payments	7
13	Offset	9
14	Currency	9
15	Unauthorized Reinsurance	9
16	Taxes	12
17	Access to Records	12
18	Confidentiality	13
19	Errors and Omissions	14
20	Insolvency	14
21	Run-Off Reinsurer	15
22	Arbitration	16
23	Expedited Arbitration	17
24	Service of Suit	18
25	Governing Law	19
26	Entire Agreement	19
27	Non-Waiver	19
28	Sanction Limitation and Exclusion Clause	20
29	Intermediary	20
30	Mode of Execution	20
	Company Signing Block	21

Attachments
	Trust Agreement Requirements Clause	22

SECOND LAYER REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 2

(the “Contract”)

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

(collectively, the “Company”)

THE SUBSCRIBING REINSURER(S) IDENTIFIED
IN THE INTERESTS AND LIABILITIES AGREEMENT(S)
ATTACHED TO AND FORMING PART OF THIS CONTRACT

(the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Company in respect of the liability that may accrue to the Company as a result of Reinstatement Premium the Company may become liable to pay under the reinstatement provisions of the Underlying Second Layer Property Catastrophe Excess of Loss Reinsurance Contract, effective at 12:01 a.m., Eastern Time, June 1, 2024 and expiring 12:01 a.m., Eastern Time, June 1, 2025, Document Number: U8GR000U (the “Original Contract”), subject to the terms and conditions herein contained. The Original Contract covers losses under Policies covering direct and assumed business classified by the Company as the property perils of Business Owners, Homeowners, Condominium Owners, Renters and Dwelling, in force at the inception of this Contract, or issued or renewed during the term of this Contract. A copy of the Original Contract is attached to and forms part of this Contract.

ARTICLE 2

COVERAGE

The Reinsurer shall be liable to pay the Reinstatement Premium obligations under the Original Contract.

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 3

ARTICLE 3

TERM

ARTICLE 4

SPECIAL TERMINATION

1. The Subscribing Reinsurer ceases underwriting operations.

2. A state insurance department or other legal authority orders the Subscribing Reinsurer to cease writing business, or the Subscribing Reinsurer is placed under regulatory supervision.

7. The Subscribing Reinsurer has been assigned an A.M. Best’s rating of less than “A-” and/or an S&P rating of less than “BBB+.” However, as respects Underwriting

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 4

Members of Lloyd’s, London, a Lloyd’s Market Rating of less than “A-” by A.M. Best and/or less than “BBB+” by S&P shall apply.

9. The Subscribing Reinsurer has in any other way assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

B. The Subscribing Reinsurer shall have no liability for Reinstatement Premium arising from Loss Occurrences commencing after termination. The premium due the Subscribing Reinsurer hereunder (including any minimum premium) shall be prorated based on the period of the Subscribing Reinsurer’s participation hereon, and the Subscribing Reinsurer shall immediately return any excess premium received.

ARTICLE 5

TERRITORY

The territorial limits of this Contract shall be identical with those of the Original Contract.

ARTICLE 6

EXCLUSIONS

This Contract shall follow the exclusions set forth in the Original Contract.

ARTICLE 7

PREMIUM

A. The premium for this Contract shall be based on the Original Contract. The Company shall pay the Reinsurer a deposit premium of [ ]. The adjusted premium to be paid to the Reinsurer for the reinsurance provided hereunder shall be calculated as the rate on line of [ ] multiplied by the Final Premium.

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 5

B. The deposit premiums set forth in paragraph A above shall be payable to the Reinsurer by the Company in equal installments of [ ] on June 1, 2024, September 1, 2024, January 1,2025, and April 1, 2025.

C. Within 45 days following the expiration of this Contract, the Company shall calculate and report the adjusted premium in accordance with paragraph A above. If the adjusted premium is less than the deposit premium paid, the Reinsurer shall remit the difference to the Company. If the adjusted premium is greater than the deposit premium paid, the Company shall immediately remit to the Reinsurer the difference.

D. The Company shall furnish the Reinsurer with such reasonably available information as may be reasonably required by the Reinsurer for completion of the Reinsurer’s financial statements.

ARTICLE 8

DEFINITIONS

A. “Reinstatement Premium” means premium paid by the Company under the provisions of the Reinstatement Article of the Original Contract. Reinstatement Premium shall be calculated at pro rata of the original reinsurance premium, being pro rata only for the amount being reinstated. If, at the time of a loss settlement under the Original Contract, the reinsurance premium thereunder is not yet known, Reinstatement Premium shall be based upon the deposit premium, subject to adjustment when said reinsurance premium is finally established. Nothing in this clause shall be construed to mean that amounts are not recoverable hereunder until the Company’s final Reinstatement Premium has been ascertained. All recoveries received subsequent to reimbursement hereunder shall be applied as if received prior to the aforesaid settlement, and all necessary adjustments shall be made by the parties hereto.

B. “Loss Occurrence” shall follow the definition set forth in the Original Contract.

C. “Final Premium” means the total reinsurance premium for the Original Contract, except for Reinstatement Premium.

D. “Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the Company.

ARTICLE 9

ORIGINAL CONDITIONS

All reinsurance under this Contract shall be subject to the same terms, conditions, waivers and interpretations, and to the same modifications and alterations as the Original Contract. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 6

ARTICLE 10

NO THIRD PARTY RIGHTS

ARTICLE 11

NOTICE OF LOSS AND LOSS SETTLEMENTS

A. The Company shall advise the Reinsurer promptly of all losses that, in the opinion of the Company, may result in a claim hereunder and of all subsequent developments thereto that may materially affect the position of the Reinsurer.

B. The Company alone and at its full discretion shall adjust, settle or compromise all claims and losses.

C. As respects losses subject to the Original Contract, all loss settlements made by the Company, whether under strict Policy terms or by way of compromise, shall be binding upon the Reinsurer, and the Reinsurer agrees to pay or allow, as the case may be, its share of each such settlement immediately upon receipt of reasonable evidence of the amount paid by the Company or that the Company estimates it will pay within the next 14 days. Within 30 days after receipt of the Reinsurer’s payment, the Company shall report to the Reinsurer the positive difference, if any, of the Reinsurer’s payment, minus the Reinsurer’s share of losses subject to this Contract that the Company has paid, or becomes liable to pay, as of the date of the report. Any such positive difference shall be remitted to the Reinsurer with the Company’s report.

ARTICLE 12

LATE PAYMENTS

1. The number of full days that have expired since the overdue date or the last monthly calculation, whichever the lesser; times

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 7

2. 1/365th of the sum of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made, plus 1%; times

3. The amount past due, including accrued interest.

Interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

B. The due date shall, for purposes of this Article, be determined as follows:

2. Payments from the Company to the Reinsurer shall be due on the dates specified within this Contract. Payments shall be overdue 30 days thereafter except for the first installment of premium, if applicable, which shall be overdue 60 days from inception or 30 days from final line-signing, whichever the later. Reinstatement Premium, if applicable, shall have as a due date the date when the Company receives payment for the claim giving rise to such Reinstatement Premium, and payment shall be overdue 30 days thereafter. In the event a due date is not specifically stated for a given payment, the overdue date shall be 30 days following the date of billing.

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 8

ARTICLE 13

OFFSET

ARTICLE 14

CURRENCY

A. Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars, and all payments hereunder shall be in United States Dollars.

B. For purposes of this Contract, where the Company receives or pays amounts in currencies other than United States Dollars, such amounts shall be converted into United States Dollars at the actual rates of exchange at which these amounts are entered in the Company’s books.

ARTICLE 15

UNAUTHORIZED REINSURANCE

A. This Article applies:

1. only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, or

1. unearned premium (if applicable);

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 9

2. known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;

3. losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;

4. losses incurred but not reported and Loss Adjustment Expense relating thereto;

5. all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.

1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 10

4. to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 11

ARTICLE 16

TAXES

ARTICLE 17

ACCESS TO RECORDS

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 12

C. For purposes of this Article:

1. “Privileged Documents” means any documents that are Attorney-Client Privilege Documents and/or Work Product Privilege Documents.

ARTICLE 18

CONFIDENTIALITY

1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;

2. have been rightfully received from a third person without obligation of confidentiality; or

3. were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

1. when required by retrocessionaires as respects business ceded to this Contract;

2. when required by regulators performing an audit of the Reinsurer’s records and/or financial condition; or

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 13

3. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business.

Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract.

D. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.

ARTICLE 19

ERRORS AND OMISSIONS

Any inadvertent error, omission or delay in complying with the terms and conditions of this Contract shall not be held to relieve either party hereto from any liability that would attach to it hereunder if such error, omission or delay had not been made, provided such error, omission or delay is rectified immediately upon discovery.

ARTICLE 20

INSOLVENCY

A. If more than one company is referenced within the definition of “Company” in the Preamble to this Contract, this Article shall apply severally to each such company. Further, this Article and the laws of the domiciliary state shall apply in the event of the insolvency of any company covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary state of any company covered hereunder, that domiciliary state’s laws shall prevail.

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 14

liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

ARTICLE 21

RUN-OFF REINSURER

A. “Run-off Reinsurer” means any Subscribing Reinsurer that:

1. has been ordered by a state insurance department or other legal authority to cease writing business, or has been placed under regulatory supervision or in rehabilitation; or

2. has ceased reinsurance underwriting operations; or

3. has transferred or delegated its claims-paying authority to an unaffiliated entity; or

5. in any other way has assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

B. Notwithstanding any other provision of this Contract, in the event that a Subscribing Reinsurer becomes a Run-off Reinsurer at any time, the Company may elect, by giving

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 15

written notice to the Run-off Reinsurer at any time thereafter, that all or any of the following shall apply to the Run-off Reinsurer’s participation hereunder:

4. The provisions of the Arbitration Article shall not apply.

C. The Company’s waiver of any rights provided in this Article is not a waiver of that right or other rights at a later date.

ARTICLE 22

ARBITRATION

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 16

days’ prior notice by certified or registered mail of its intention to do so, may appoint the second arbitrator.

D. Within 30 days after all arbitrators have been appointed, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules of hearings.

ARTICLE 23

EXPEDITED ARBITRATION

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 17

ARTICLE 24

SERVICE OF SUIT

D. Service of process in such suit may be made upon:

1. as respects Underwriting Members of Lloyd’s, London: Lloyd’s America, Inc., Attention: Legal Department, 280 Park Avenue, East Tower, 25th Floor, New York, New York 10017;

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 18

The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.

ARTICLE 25

GOVERNING LAW

ARTICLE 26

ENTIRE AGREEMENT

ARTICLE 27

NON-WAIVER

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 19

ARTICLE 28

SANCTION LIMITATION AND EXCLUSION CLAUSE

ARTICLE 29

INTERMEDIARY

ARTICLE 30

MODE OF EXECUTION

A. This Contract may be executed by:

1. an original written ink signature of paper documents;

2. an exchange of facsimile copies showing the original written ink signature of paper documents;

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 20

On this _____ day of __________, in the year of 20___.

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Signature: Title:

Print Name:

SECOND LAYER REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 21

TRUST AGREEMENT REQUIREMENTS CLAUSE

1. Requires the Reinsurer to establish a trust account for the benefit of the Company, and specifies what the Trust Agreement is to cover;

4. Requires that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent; and

5. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the Company or the Reinsurer.

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 22

3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, whenever necessary, negotiate these assets without consent or signature from the Reinsurer or any other entity.

4. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the ceding insurer or the Reinsurer.

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000W 23

EX-10.12 6 hci-ex10_12.htm EX-10.12 EX-10.12

EXHIBIT 10.12. Certain identified information has been excluded from this exhibit because it is immaterial and would be competitively harmful if publicly disclosed. Information that has been omitted is indicated with brackets.

EXHIBIT 10.12THIRD LAYER PROPERTY CATASTROPHE

EXCESS OF LOSS REINSURANCE CONTRACT

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 1 of NUMPAGES 3


THIRD LAYER PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS
Article		Page

	Preamble	3
1	Business Covered	4
2	Retention and Limit	4
3	Florida Hurricane Catastrophe Fund	5
4	Term	6
5	Special Termination	6
6	Territory	8
7	Exclusions	8
8	Special Acceptance	10
9	Premium	10
10	Reinstatement	11
11	Definitions	11
12	Extra Contractual Obligations/Excess of Policy Limits	14
13	Net Retained Liability	15
14	Original Conditions	16
15	No Third Party Rights	16
16	Notice of Loss and Loss Settlements	16
17	Late Payments	17
18	Offset	18
19	Currency	18
20	Unauthorized Reinsurance	18
21	Taxes	21
22	Access to Records	21
23	Confidentiality	22
24	Indemnification and Errors and Omissions	23
25	Insolvency	24
26	Run-Off Reinsurer	25
27	Arbitration	26
28	Expedited Arbitration	27
29	Service of Suit	28
30	Governing Law	29
31	Entire Agreement	29
32	Non-Waiver	30
33	Sanction Limitation and Exclusion Clause	30
34	Intermediary	30
35	Mode of Execution	30

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 2 of NUMPAGES 3


	Company Signing Block	32


THIRD LAYER PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS
Attachments		Page

	Pools, Associations & Syndicates Exclusions Clause	33
	Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A.	37
	Terrorism Exclusion	39
	Communicable Disease Exclusion (Property Treaty Reinsurance)	40
	Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance)	41
	Trust Agreement Requirements Clause	42

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 3 of NUMPAGES 3

THIRD LAYER PROPERTY CATASTROPHE

EXCESS OF LOSS REINSURANCE CONTRACT

(the “Contract”)

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

(collectively, the “Company”)

THE SUBSCRIBING REINSURER(S) IDENTIFIED IN THE
INTERESTS AND LIABILITIES AGREEMENT(S) ATTACHED TO
AND FORMING PART OF THIS CONTRACT

(the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Company in respect of its net excess liability as a result of any

ARTICLE 2

RETENTION AND LIMIT

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 4 of NUMPAGES 3

ARTICLE 3

FLORIDA HURRICANE CATASTROPHE FUND

B. Any FHCF reimbursement premiums paid by the Company for FHCF layers that inure to the benefit of this Contract shall be deemed to be premiums paid for inuring reinsurance.

C. The Company has opted for 90% coverage selections from the FHCF.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 5 of NUMPAGES 3

ARTICLE 4

TERM

ARTICLE 5

SPECIAL TERMINATION

1. The Subscribing Reinsurer ceases underwriting operations.

2. A state insurance department or other legal authority orders the Subscribing Reinsurer to cease writing business, or the Subscribing Reinsurer is placed under regulatory supervision.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 6 of NUMPAGES 3

7. The Subscribing Reinsurer has been assigned an A.M. Best’s rating of less than “A-” and/or an S&P rating of less than “BBB+.” However, as respects Underwriting Members of Lloyd’s, London, a Lloyd’s Market Rating of less than “A-” by A.M. Best and/or less than “BBB+” by S&P shall apply.

9. The Subscribing Reinsurer has in any other way assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 7 of NUMPAGES 3

D. The Company’s option to require commutation under paragraph C above shall survive the termination or expiration of this Contract.

ARTICLE 6

TERRITORY

This Contract shall apply to Policies issued in the State of Florida.

ARTICLE 7

EXCLUSIONS

A. This Contract shall not apply to and specifically excludes:

1. Flood when written as such.

2. Earthquake for standalone Policies where earthquake is the only named peril.

3. Hail damage to an insured’s growing or standing crops.

5. Pools, Associations & Syndicates, per the attached exclusion.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 8 of NUMPAGES 3

8. Losses excluded by the attached Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance – U.S.A.

9. Terrorism as defined in the attached Terrorism Exclusion.

10. Mold unless directly resulting from an otherwise covered peril.

12. Financial guarantee and insolvency.

14. Losses excluded by the attached Communicable Disease Exclusion (Property Treaty Reinsurance).

15. Loss Excluded by the attached Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance).

16. Policies written by TypTap Insurance Company.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 9 of NUMPAGES 3

ARTICLE 8

SPECIAL ACCEPTANCE

ARTICLE 9

PREMIUM

A. The Company shall pay the Reinsurer a Deposit Premium of [ ] for the term of this Contract, to be paid in the amount of [ ] on June 1, 2024, September 1, 2024, January 1, 2025, and April 1, 2025.

B. Within 45 days following the expiration of this Contract, the Company shall provide the Reinsurer with a report showing the Company’s final Total Insured Value. This final Total Insured Value shall be multiplied by the Final Adjusted Premium Rate of [ ]. Should this amount be greater than or equal to [ ] and less than or equal to [ ] of the Deposit Premium as set forth above, there shall be no additional or return premium due. Should the amount so calculated exceed [ ] of the Deposit Premium paid in accordance with paragraph A above, the Company shall immediately pay the Reinsurer the difference in excess of [ ] of the Deposit Premium. Should the amount so calculated be less than [ ] of the Deposit Premium paid in accordance with paragraph A of this Article, the Reinsurer shall immediately pay the Company the difference below [ ] of the Deposit Premium, subject to the Minimum Premium of [ ].

C. “Total Insured Value” means the Company’s aggregate wind exposures on September 30, 2024 for business covered hereunder.

D. The estimated Total Insured Value is $44,075,532,874.

E. The Company shall furnish the Reinsurer with such reasonably available information as may be reasonably required by the Reinsurer for completion of the Reinsurer’s financial statements.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 10 of NUMPAGES 3

ARTICLE 10

REINSTATEMENT

ARTICLE 11

DEFINITIONS

4. The Company shall be deemed to be “liable to pay” a loss when a judgment has been rendered that the Company does not plan to appeal, and/or the Company has obtained

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 11 of NUMPAGES 3

a release, and/or the Company has accepted a proof of loss, and/or the Company has made a commitment to pay, and/or the Company has scheduled the payment of a loss.

5. Nothing in this clause shall be construed to mean that losses are not recoverable hereunder until the Company’s “Ultimate Net Loss” has been ascertained.

1. court costs;

2. costs of supersedeas and appeal bonds;

3. monitoring counsel expenses;

4. legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including but not limited to declaratory judgment actions;

5. post-judgment interest;

6. pre-judgment interest, unless included as part of an award or judgment;

8. subrogation, salvage and recovery expenses.

“Loss Adjustment Expense” does not include salaries and expenses of the Company’s employees, except as provided in subparagraph (7) above, and office and other overhead expenses.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 12 of NUMPAGES 3

storm or storm system declared by the US National Hurricane Center, US Central Pacific Hurricane Center, US Weather Prediction Center, or their successor organizations, all being divisions of the US National Weather Service to be a tropical storm or hurricane, and any successors thereof. A storm or storm system that merges with a “Named Storm” shall be considered part of that “Named Storm,” once it has merged. A “Named Storm” shall be deemed to begin at the effective time and date of the first watch, warning or other official advisory applicable to such tropical storm or hurricane issued by the above referenced governmental meteorological agencies. A “Named Storm” shall be deemed to end 72 hours after the cancellation of the last watch, warning or other official advisory applicable to such tropical storm, hurricane or successor, issued by the above referenced governmental meteorological agencies irrespective of the duration of the timing or spacing between such watches, warnings or other official advisories. If two or more storms are assigned different names by the above referenced governmental meteorological agencies, each of those storms shall constitute a separate event for purposes of this definition.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 13 of NUMPAGES 3

Company occurring during any period of 168 consecutive hours within a 150-mile radius of any fixed point selected by the Company may be included in the Company’s “Loss Occurrence.” However, an individual loss subject to this subparagraph cannot be included in more than one “Loss Occurrence.”

2. Except as provided in subparagraph (1)(a) above:

D. “Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the Company.

ARTICLE 12

EXTRA CONTRACTUAL OBLIGATIONS/EXCESS OF POLICY LIMITS

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 14 of NUMPAGES 3

the following: failure by the Company to settle within the Policy limit, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action.

B. This Contract shall cover Loss in Excess of Policy Limits, as provided in the definition of Ultimate Net Loss. “Loss in Excess of Policy Limits” shall be defined as Loss in excess of the Policy limit, having been incurred because of, but not limited to, failure by the Company to settle within the Policy limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action.

E. Loss Adjustment Expense in respect of Extra Contractual Obligations and/or Loss in Excess of Policy Limits shall be covered hereunder in the same manner as other Loss Adjustment Expense.

G. In no event shall coverage be provided to the extent not permitted under law.

ARTICLE 13

NET RETAINED LIABILITY

A. This Contract applies only to that portion of any loss that the Company retains net for its own account (prior to deduction of any reinsurance that inures solely to the benefit of the Company).

B. The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s),

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 15 of NUMPAGES 3

whether specific or general, any amounts that may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

ARTICLE 14

ORIGINAL CONDITIONS

All reinsurance under this Contract shall be subject to the same terms, conditions, waivers and interpretations, and to the same modifications and alterations as the respective Policies of the Company. However, in no event shall this be construed in any way to provide coverage outside the terms and conditions set forth in this Contract.

ARTICLE 15

NO THIRD PARTY RIGHTS

ARTICLE 16

NOTICE OF LOSS AND LOSS SETTLEMENTS

B. The Company alone and at its full discretion shall adjust, settle or compromise all claims and losses.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 16 of NUMPAGES 3

ARTICLE 17

LATE PAYMENTS

1. The number of full days that have expired since the overdue date or the last monthly calculation, whichever the lesser; times

2. 1/365th of the sum of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made, plus 1%; times

3. The amount past due, including accrued interest.

Interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

B. The due date shall, for purposes of this Article, be determined as follows:

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 17 of NUMPAGES 3

ARTICLE 18

OFFSET

ARTICLE 19

CURRENCY

A. Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars, and all payments hereunder shall be in United States Dollars.

ARTICLE 20

UNAUTHORIZED REINSURANCE

A. This Article applies:

1. only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, or

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 18 of NUMPAGES 3

such Subscribing Reinsurer shall fund 100% of its share of the Reinsurer’s Obligations as hereinafter provided.

1. unearned premium (if applicable);

2. known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;

3. losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;

4. losses incurred but not reported and Loss Adjustment Expense relating thereto;

5. all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 19 of NUMPAGES 3

conservator of the Company, for the following purposes, unless otherwise provided for in a separate Trust Agreement:

1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;

3. to fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer. Any taxes payable on accrued interest shall be paid out of the assets in the account that are in excess of the Reinsurer’s Obligations (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement). If the assets are inadequate to pay taxes, any taxes due shall be paid or reimbursed by the Reinsurer;

4. to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 20 of NUMPAGES 3

ARTICLE 21

TAXES

ARTICLE 22

ACCESS TO RECORDS

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 21 of NUMPAGES 3

reinsured hereunder following final settlement or final adjudication of the case or cases involving such claim, with prejudice against all claimants and all parties to such adjudications; the Company may defer release of such Privileged Documents if there are subrogation, contribution, or other third party actions with respect to that claim or case, and the Company’s defense might be jeopardized by release of such Privileged Documents. In the event that the Company seeks to defer release of such Privileged Documents, it shall, in consultation with the Reinsurer, take other steps as reasonably necessary to provide the Reinsurer with the information it reasonably requires to indemnify the Company without causing a loss of such privileges or protections. The Reinsurer shall not have access to Privileged Documents relating to any dispute between the Company and the Reinsurer.

C. For purposes of this Article:

1. “Privileged Documents” means any documents that are Attorney-Client Privilege Documents and/or Work Product Privilege Documents.

ARTICLE 23

CONFIDENTIALITY

1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;

2. have been rightfully received from a third person without obligation of confidentiality; or

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 22 of NUMPAGES 3

3. were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

1. when required by retrocessionaires as respects business ceded to this Contract;

2. when required by regulators performing an audit of the Reinsurer’s records and/or financial condition; or

3. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business.

Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract.

D. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.

ARTICLE 24

INDEMNIFICATION AND ERRORS AND OMISSIONS

A. The Reinsurer is reinsuring, subject to the terms and conditions of this Contract, the obligations of the Company under any Policy. The Company shall be the sole judge as to:

1. what shall constitute a claim or loss covered under any Policy;

2. the Company’s liability thereunder; and

3. the amount or amounts that it shall be proper for the Company to pay thereunder.

B. The Reinsurer shall be bound by the judgment of the Company as to the obligation(s) and liability(ies) of the Company under any Policy.

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U8GR000V 23 of NUMPAGES 3

D. Nothing in this Article shall be construed to override any of the other terms and conditions of this Contract.

ARTICLE 25

INSOLVENCY

A. If more than one reinsured company is referenced within the definition of “Company” in the Preamble to this Contract, this Article shall apply severally to each such company. Further, this Article and the laws of the domiciliary state shall apply in the event of the insolvency of any company covered hereunder. In the event of a conflict between any provision of this Article and the laws of the domiciliary state of any company covered hereunder, that domiciliary state’s laws shall prevail.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 24 of NUMPAGES 3

ARTICLE 26

RUN-OFF REINSURER

A. “Run-off Reinsurer” means any Subscribing Reinsurer that:

1. has been ordered by a state insurance department or other legal authority to cease writing business, or has been placed under regulatory supervision or in rehabilitation; or

2. has ceased reinsurance underwriting operations; or

3. has transferred or delegated its claims-paying authority to an unaffiliated entity; or

5. in any other way has assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

B. Notwithstanding any other provision of this Contract, in the event that a Subscribing Reinsurer becomes a Run-off Reinsurer at any time, the Company may elect, by giving

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 25 of NUMPAGES 3

written notice to the Run-off Reinsurer at any time thereafter, that all or any of the following shall apply to the Run-off Reinsurer’s participation hereunder:

4. The provisions of the Arbitration Article shall not apply.

C. The Company’s waiver of any rights provided in this Article is not a waiver of that right or other rights at a later date.

ARTICLE 27

ARBITRATION

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 26 of NUMPAGES 3

days’ prior notice by certified or registered mail of its intention to do so, may appoint the second arbitrator.

D. Within 30 days after all arbitrators have been appointed, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules of hearings.

ARTICLE 28

EXPEDITED ARBITRATION

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U8GR000V 27 of NUMPAGES 3

for selecting an arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society - U.S. (ARIAS).

ARTICLE 29

SERVICE OF SUIT

D. Service of process in such suit may be made upon:

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U8GR000V 28 of NUMPAGES 3

1. as respects Underwriting Members of Lloyd’s, London: Lloyd’s America, Inc., Attention: Legal Department, 280 Park Avenue, East Tower, 25th Floor, New York, New York 10017;

The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.

ARTICLE 30

GOVERNING LAW

ARTICLE 31

ENTIRE AGREEMENT

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 29 of NUMPAGES 3

ARTICLE 32

NON-WAIVER

ARTICLE 33

SANCTION LIMITATION AND EXCLUSION CLAUSE

ARTICLE 34

INTERMEDIARY

ARTICLE 35

MODE OF EXECUTION

A. This Contract may be executed by:

1. an original written ink signature of paper documents;

2. an exchange of facsimile copies showing the original written ink signature of paper documents;

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 30 of NUMPAGES 3

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 31 of NUMPAGES 3

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Signature: Title:

Print Name:

THIRD LAYER PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

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U8GR000V 32 of NUMPAGES 3

POOLS, ASSOCIATIONS & SYNDICATES EXCLUSIONS CLAUSE

Section A:

This Contract excludes:

a. All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.

Section B:

Oil, Gas or Petro-Chemical Plants

Oil or Gas Drilling Rigs and/or

Aviation Risks

2. The exclusion under paragraph 1 of this Section B does not apply:

a. Where the Total Insured Value over all interests of the risk in question is less than $250,000,000.

b. To interests traditionally underwritten as Inland Marine and/or Stock and/or Contents written on a Blanket basis.

Section C:

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U8GR000V 33 of NUMPAGES 3

a. So-called “Beach and Windstorm Plans” and so-called “Coastal Pools”;

b. All “FAIR Plan” and “Rural Risk Plan” business;

c. Louisiana Citizens Property Insurance Corporation;

d. California Earthquake Authority (“CEA”) or any similar entity.

2. However, this reinsurance does not include any increase in such liability resulting from:

a. The inability of any other participant in such Residual Market Mechanisms to meet its liability;

c. Any assessment or surcharge levied on the policyholder and therefore not a liability of the Company;

d. The Company’s initial capital contribution to the CEA;

e. Any assessments, other than interim and regular assessments, from a Residual Market Mechanism included in subparagraph 1(c) above;

f. Any expenditure to purchase or retire bonds.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR000V 34 of NUMPAGES 3

contract), and therefore deductible from Ultimate Net Loss, shall not be included in the subject premium of this Contract.

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U8GR000V 35 of NUMPAGES 3

NOTES: Wherever used herein the terms:

“Contract” shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.

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U8GR000V 36 of NUMPAGES 3

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - U.S.A.

I. Nuclear reactor power plants including all auxiliary property on the site, or

II. Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or

IV. Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

(a) where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

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U8GR000V 37 of NUMPAGES 3

6. The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.

7. Reassured to be sole judge of what constitutes:

(a) substantial quantities, and

(b) the extent of installation, plant or site.

Note: Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

12/12/57

NMA 1119

NOTES: Wherever used herein the terms:

“Agreement” shall be understood to mean “Agreement”, “Contract”, “Policy” or whatever other term is used to designate the attached reinsurance document.

“Reinsurers” shall be understood to mean “Reinsurers”, “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

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U8GR000V 38 of NUMPAGES 3

TERRORISM EXCLUSION

a. involves violence against one or more persons; or

b. involves damage to property; or

c. endangers life other than that of the person committing the action; or

d. creates a risk to health or safety of the public or a section of the public; or

e. is designed to interfere with or to disrupt an electronic system.

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U8GR000V 39 of NUMPAGES 3

COMMUNICABLE DISEASE EXCLUSION (PROPERTY TREATY REINSURANCE)

Definitions

3. Communicable Disease means any disease which can be transmitted by means of any substance or agent from any organism to another organism where:

3.1. the substance or agent includes, but is not limited to, a virus, bacterium, parasite or other organism or any variation thereof, whether deemed living or not, and

4. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.

LMA5503

15 May 2020

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U8GR000V 40 of NUMPAGES 3

CYBER LOSS LIMITED EXCLUSION CLAUSE (PROPERTY TREATY REINSURANCE)

1.2. any loss of, alteration of, or damage to or a reduction in the functionality, availability or operation of a Computer System, unless subject to the provisions of paragraph 2;

1.3. any loss of use, reduction in functionality, repair, replacement, restoration or reproduction of any Data, including any amount pertaining to the value of such Data.

fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow

Definitions

5. Time Element Loss means business interruption, contingent business interruption or any other consequential losses.

LMA5410

06 March 2020

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U8GR000V 41 of NUMPAGES 3

TRUST AGREEMENT REQUIREMENTS CLAUSE

1. Requires the Reinsurer to establish a trust account for the benefit of the Company, and specifies what the Trust Agreement is to cover;

4. Requires that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent; and

5. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the Company or the Reinsurer.

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U8GR000V 42 of NUMPAGES 3

3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, whenever necessary, negotiate these assets without consent or signature from the Reinsurer or any other entity.

4. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the ceding insurer or the Reinsurer.

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U8GR000V 43 of NUMPAGES 3

EX-10.13 7 hci-ex10_13.htm EX-10.13 EX-10.13

EXHIBIT 10.13. Certain identified information has been excluded from this exhibit because it is immaterial and would be competitively harmful if publicly disclosed. Information that has been omitted is indicated with brackets.

EXHIBIT 10.13THIRD LAYER REINSTATEMENT PREMIUM PROTECTION

REINSURANCE CONTRACT

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000X 1 of NUMPAGES 3


THIRD LAYER REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT TABLE OF CONTENTS
Article		Page

	Preamble	2
1	Business Covered	3
2	Coverage	3
3	Term	4
4	Special Termination	4
5	Territory	5
6	Exclusions	5
7	Premium	6
8	Definitions	6
9	Original Conditions	7
10	No Third Party Rights	7
11	Notice of Loss and Loss Settlements	7
12	Late Payments	8
13	Offset	9
14	Currency	9
15	Unauthorized Reinsurance	9
16	Taxes	12
17	Access to Records	12
18	Confidentiality	13
19	Errors and Omissions	14
20	Insolvency	14
21	Run-Off Reinsurer	15
22	Arbitration	17
23	Expedited Arbitration	18
24	Service of Suit	18
25	Governing Law	19
26	Entire Agreement	20
27	Non-Waiver	20
28	Sanction Limitation and Exclusion Clause	20
29	Intermediary	20
30	Mode of Execution	21
	Company Signing Block	22

Attachments
	Trust Agreement Requirements Clause	23

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U8GR000X 2 of NUMPAGES 3

THIRD LAYER REINSTATEMENT PREMIUM PROTECTION

REINSURANCE CONTRACT

(the “Contract”)

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

(collectively, the “Company”)

THE SUBSCRIBING REINSURER(S) IDENTIFIED
IN THE INTERESTS AND LIABILITIES AGREEMENT(S)
ATTACHED TO AND FORMING PART OF THIS CONTRACT

(the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Company in respect of the liability that may accrue to the Company as a result of Reinstatement Premium the Company may become liable to pay under the reinstatement provisions of the Third Layer Property Catastrophe Excess of Loss Reinsurance Contract, effective at 12:01 a.m., Eastern Time, June 1, 2024 and expiring 12:01 a.m., Eastern Time, June 1, 2025, Document Number: U8GR000V (the “Original Contract”), subject to the terms and conditions herein contained. The Original Contract covers losses under Policies covering direct and assumed business classified by the Company as the property perils of Business Owners, Homeowners, Condominium Owners, Renters and Dwelling, in force at the inception of this Contract, or issued or renewed during the term of this Contract. A copy of the Original Contract is attached to and forms part of this Contract.

ARTICLE 2

COVERAGE

The Reinsurer shall be liable to pay the Reinstatement Premium obligations under the Original Contract.

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U8GR000X 3 of NUMPAGES 3

ARTICLE 3

TERM

ARTICLE 4

SPECIAL TERMINATION

1. The Subscribing Reinsurer ceases underwriting operations.

2. A state insurance department or other legal authority orders the Subscribing Reinsurer to cease writing business, or the Subscribing Reinsurer is placed under regulatory supervision.

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U8GR000X 4 of NUMPAGES 3

9. The Subscribing Reinsurer has in any other way assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

ARTICLE 5

TERRITORY

The territorial limits of this Contract shall be identical with those of the Original Contract.

ARTICLE 6

EXCLUSIONS

This Contract shall follow the exclusions set forth in the Original Contract.

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U8GR000X 5 of NUMPAGES 3

ARTICLE 7

PREMIUM

D. The Company shall furnish the Reinsurer with such reasonably available information as may be reasonably required by the Reinsurer for completion of the Reinsurer’s financial statements.

ARTICLE 8

DEFINITIONS

B. “Loss Occurrence” shall follow the definition set forth in the Original Contract.

C. “Final Premium” means the total reinsurance premium for the Original Contract except for Reinstatement Premium.

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U8GR000X 6 of NUMPAGES 3

D. “Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the Company.

ARTICLE 9

ORIGINAL CONDITIONS

ARTICLE 10

NO THIRD PARTY RIGHTS

ARTICLE 11

NOTICE OF LOSS AND LOSS SETTLEMENTS

B. The Company alone and at its full discretion shall adjust, settle or compromise all claims and losses.

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U8GR000X 7 of NUMPAGES 3

ARTICLE 12

LATE PAYMENTS

1. The number of full days that have expired since the overdue date or the last monthly calculation, whichever the lesser; times

2. 1/365th of the sum of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made, plus 1%; times

3. The amount past due, including accrued interest.

Interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

B. The due date shall, for purposes of this Article, be determined as follows:

2. Payments from the Company to the Reinsurer shall be due on the dates specified within this Contract. Payments shall be overdue 30 days thereafter except for the first installment of premium, if applicable, which shall be overdue 60 days from inception or 30 days from final line-signing, whichever the later. Reinstatement Premium, if applicable, shall have as a due date the date when the Company receives payment for the claim giving rise to such Reinstatement Premium, and payment shall be overdue 30 days thereafter. In the event a due date is not specifically stated for a given payment, the overdue date shall be 30 days following the date of billing.

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U8GR000X 8 of NUMPAGES 3

ARTICLE 13

OFFSET

ARTICLE 14

CURRENCY

A. Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars, and all payments hereunder shall be in United States Dollars.

ARTICLE 15

UNAUTHORIZED REINSURANCE

A. This Article applies:

1. only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, or

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U8GR000X 9 of NUMPAGES 3

1. unearned premium (if applicable);

2. known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;

3. losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;

4. losses incurred but not reported and Loss Adjustment Expense relating thereto;

5. all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.

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U8GR000X 10 of NUMPAGES 3

1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;

4. to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

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U8GR000X 11 of NUMPAGES 3

the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the LOC reducing the amount of credit available by the amount of such excess credit. Should another method of funding be used, the Company shall, within the time period outlined above, decrease such funding by the amount of such excess.

ARTICLE 16

TAXES

ARTICLE 17

ACCESS TO RECORDS

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U8GR000X 12 of NUMPAGES 3

subrogation, contribution, or other third party actions with respect to that claim or case, and the Company’s defense might be jeopardized by release of such Privileged Documents. In the event that the Company seeks to defer release of such Privileged Documents, it shall, in consultation with the Reinsurer, take other steps as reasonably necessary to provide the Reinsurer with the information it reasonably requires to indemnify the Company without causing a loss of such privileges or protections. The Reinsurer shall not have access to Privileged Documents relating to any dispute between the Company and the Reinsurer.

C. For purposes of this Article:

1. “Privileged Documents” means any documents that are Attorney-Client Privilege Documents and/or Work Product Privilege Documents.

ARTICLE 18

CONFIDENTIALITY

1. are publicly known or have become publicly known through no unauthorized act of the Reinsurer;

2. have been rightfully received from a third person without obligation of confidentiality; or

3. were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

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U8GR000X 13 of NUMPAGES 3

1. when required by retrocessionaires as respects business ceded to this Contract;

2. when required by regulators performing an audit of the Reinsurer’s records and/or financial condition; or

3. when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business.

Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract.

D. The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.

ARTICLE 19

ERRORS AND OMISSIONS

ARTICLE 20

INSOLVENCY

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U8GR000X 14 of NUMPAGES 3

B. In the event of the insolvency of the Company, this coverage (or the portion of any risk or obligation assumed by the Reinsurer, if required by applicable law) shall be payable directly to the Company, or to its liquidator, receiver, conservator or statutory successor, either: (1) on the basis of the liability of the Company, or (2) on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute, without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim against the Company indicating the Policy or bond reinsured, which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

ARTICLE 21

RUN-OFF REINSURER

A. “Run-off Reinsurer” means any Subscribing Reinsurer that:

1. has been ordered by a state insurance department or other legal authority to cease writing business, or has been placed under regulatory supervision or in rehabilitation; or

2. has ceased reinsurance underwriting operations; or

3. has transferred or delegated its claims-paying authority to an unaffiliated entity; or

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U8GR000X 15 of NUMPAGES 3

5. in any other way has assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

4. The provisions of the Arbitration Article shall not apply.

C. The Company’s waiver of any rights provided in this Article is not a waiver of that right or other rights at a later date.

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U8GR000X 16 of NUMPAGES 3

ARTICLE 22

ARBITRATION

D. Within 30 days after all arbitrators have been appointed, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules of hearings.

G. Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator. The remaining costs of the arbitration shall be

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U8GR000X 17 of NUMPAGES 3

allocated by the panel. The panel may, at its discretion, award such further costs and expenses as it considers appropriate, including but not limited to attorneys’ fees, to the extent permitted by law.

ARTICLE 23

EXPEDITED ARBITRATION

ARTICLE 24

SERVICE OF SUIT

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U8GR000X 18 of NUMPAGES 3

court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Reinsurer, once the appropriate court is selected, whether such court is the one originally chosen by the Company and accepted by the Reinsurer or is determined by removal, transfer, or otherwise, as provided for above, shall comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against the Reinsurer upon this Contract, shall abide by the final decision of such court or of any appellate court in the event of an appeal.

D. Service of process in such suit may be made upon:

1. as respects Underwriting Members of Lloyd’s, London: Lloyd’s America, Inc., Attention: Legal Department, 280 Park Avenue, East Tower, 25th Floor, New York, New York 10017;

The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.

ARTICLE 25

GOVERNING LAW

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U8GR000X 19 of NUMPAGES 3

ARTICLE 26

ENTIRE AGREEMENT

ARTICLE 27

NON-WAIVER

ARTICLE 28

SANCTION LIMITATION AND EXCLUSION CLAUSE

ARTICLE 29

INTERMEDIARY

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U8GR000X 20 of NUMPAGES 3

ARTICLE 30

MODE OF EXECUTION

A. This Contract may be executed by:

1. an original written ink signature of paper documents;

2. an exchange of facsimile copies showing the original written ink signature of paper documents;

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U8GR000X 21 of NUMPAGES 3

On this _____ day of __________, in the year of 20___.

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Signature: Title:

Print Name:

THIRD LAYER REINSTATEMENT PREMIUM PROTECTION REINSURANCE CONTRACT

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U8GR000X 22 of NUMPAGES 3

TRUST AGREEMENT REQUIREMENTS CLAUSE

1. Requires the Reinsurer to establish a trust account for the benefit of the Company, and specifies what the Trust Agreement is to cover;

4. Requires that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent; and

5. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the Company or the Reinsurer.

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U8GR000X 23 of NUMPAGES 3

3. Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, whenever necessary, negotiate these assets without consent or signature from the Reinsurer or any other entity.

4. Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the ceding insurer or the Reinsurer.

Effective: June 1, 2024 DOC: June 10, 2024

U8GR000X 24 of NUMPAGES 3

EX-10.14 8 hci-ex10_14.htm EX-10.14 EX-10.14

EXHIBIT 10.14. Certain identified information has been excluded from this exhibit because it is immaterial and would be competitively harmful if publicly disclosed. Information that has been omitted is indicated with brackets.

EXHIBIT 10.14

    Policy Number: U8GR000Z

   

    Renewing:   New

   

    Reinsured: HOMEOWNERS CHOICE PROPERTY & 
                  CASUALTY INSURANCE COMPANY, INC.

    Account:     Catastrophe County Weighted Industry Loss 1@100%
                   Florida Named Windstorm Perils
                   $90m CWIL xs $50m CWIL
                   Limit: 100% of $20.7m UNL xs $10,000 UNL

Guy Carpenter & Company Limited

as agent of

Marsh Limited1

    PRACTICE

   

    CODE
GB0133
 
PROG.
PROG
NO
 
SPECIALTY CODE
PC

Unique Market Reference: U8GR000Z Page 1 of NUMPAGES 30

MARKET REFORM CONTRACT DOCUMENT

All references throughout this document to Guy Carpenter & Company Limited shall be to Guy Carpenter & Company Limited as agent of Marsh Limited

Unique Market Reference: U8GR000Z Page 2 of NUMPAGES 30

BRE 775 Agreement Number: U8GR000Z

Market Reform Contract

RISK DETAILS SECTION

UNIQUE MARKET

REFERENCE: U8GR000Z

REINSURED: HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC., Tampa, Florida

REINSURER: NAUTICAL MANAGEMENT LTD. ON BEHALF OF MARKEL BERMUDA LIMITED ANDNAUTICAL MANAGEMENT LTD. ON BEHALF OF SYNDICATE 2357 AT LLOYD’S.

PERIOD: This Contract is in respect of losses occurring during the period commencing 9th July, 2024 and expiring 31st May, 2025, both days inclusive, Eastern Time.

TYPE: COUNTY WEIGHTED INDUSTRY LOSS (CWIL) REINSURANCE CONTRACT.

CLASS OF

BUSINESS: Upon the occurrence of a Loss Occurrence, as specified below, this Contract is to cover the EXCESS LIABILITY which may accrue to the Reinsured during the Period of this Contract, under all policies and/or contracts of Insurance or Reinsurance entered into by the Reinsured, in respect of all losses resulting from ‘Named Windstorm’.

For the purpose of this Contract ‘Named Windstorm’ shall be defined as any storm or storm system or weather condition that are allocated names (including Greek alphabet symbols) at any time in its lifecycle by the World Meteorological Organization (WMO) Geneva Switzerland and/or United States National Weather Service (NWS), and/or tracked by the National Hurricane Center (NHC), part of the National Oceanic and Atmospheric Administration (NOAA)’s Tropical Prediction Center, or any successor thereof.

For the avoidance of doubt, Named Windstorm shall include all ensuing therefrom, but not standalone flood losses expressly reported as such.

TERRITORIAL

SCOPE: This Contract shall only respond in the event the County Weighted Industry Loss from a qualifying Original Insured Market Loss resulting from Named Windstorms occurring in the so-called ‘Panhandle’ counties within the State of Florida (as listed under Schedule ‘A’) is greater than the CWIL Index Trigger of [ ]

Notwithstanding the foregoing, once the CWIL from a qualifying Original Insured Market Loss is sufficient to trigger this Contract the Reinsured may include all losses, wheresoever occurring, from such Loss Occurrence towards their Ultimate Net Loss hereunder.

EXCLUSIONS: Full list of Exclusions as per attached.

Unique Market Reference: U8GR000Z Page 3 of NUMPAGES 30

BRE 775 Agreement Number: U8GR000Z

Market Reform Contract

REPORTING

AGENCY: In the event of there being a loss hereon the Reinsured shall use, and both parties shall accept, the Original Insured Market Loss figures issued by Property Claim Services of Jersey City, New Jersey a division of ISO Services Inc, or any successor in interest thereto (the “Reporting Agency”).

For the avoidance doubt, Original Insured Market Loss estimates published by “PCS Global Marine and Energy”, “PCS Global Cyber” or “PCS Global Large Loss Database” shall not be taken into account.

In the event that a Reporting Agency is discontinued or materially changes its methodology in a way that makes it unsuitable for the purpose intended, or fails to report an estimate of insured loss, an alternative source (a “Replacement Reporting Agency”) will be used subject to the mutual agreement of the Reinsured and the Reinsurer. Failing mutual agreement on a comparable alternative source, the alternative source will be determined by arbitration in accordance with the Arbitration clause of this Contract.

LIMITS: THE REINSURER HEREBY AGREES TO PAY TO THE REINSURED UP TO:

[ ] Ultimate Net Loss, each and every Loss Occurrence (“the Limit of Liability”),

IN EXCESS OF

[ ] Ultimate Net Loss, each and every Loss Occurrence.

Maximum Recoverable

The maximum recoverable hereunder shall be [ ] per Loss Occurrence, and [ ] in all in the aggregate, with respect to any and all of the Reinsurer’s obligations arising hereunder or with respect hereto, including without limitation, all extra contractual claims and expenses.

PREMIUM

FOR PERIOD: As premium for this Contract, the Reinsured shall pay the Reinsurer [ ] payable within 15 days of the inception date of this Contract.

REINSTATEMENT

PROVISIONS: One full reinstatement at pro-rata (as to indemnity only) of 100% additional premium in accordance with the full clause attached hereto.

PREMIUM

PAYMENT TERMS: None.

TAXES PAYABLE

BY REINSURED &

ADMINISTERED

BY REINSURERS: None.

Unique Market Reference: U8GR000Z Page 4 of NUMPAGES 30

BRE 775 Agreement Number: U8GR000Z

Market Reform Contract

CHOICE OF

LAW AND

JURISDICTION: Subject to the prior application of the Arbitration Clause, this Contract is governed by and is construed according to the laws of the State of Florida and any court of competent jurisdiction in the State of Florida shall have exclusive jurisdiction over all matters relating to this Contract.

COUNTY

WEIGHTED

INDUSTRY LOSS: Under no circumstances will the Reinsurer be liable for any payment under this Contract unless the County Weighted Industry Loss (“CWIL”) is greater than [ ] (the “Index Trigger”), as a result of a Loss Occurrence during the Period of this Contract arising out of a Named Windstorm occurring within the TERRITORIAL SCOPE.

Notwithstanding the foregoing, if the CWIL is greater than [ ] during the Reporting Period the Reinsurer shall only be liable under this Contract for the portion of the Limit of Liability hereon as calculated using the following formula:

(A-B)C×D

Where:-

A = The CWIL or [ ], whichever is the lesser amount

B = [ ]

C = [ ]

D = [ ] (the Limit of Liability per Loss Occurrence)

The layer described above, being CWIL [ ] excess of CWIL [ ] in respect of a Named Windstorm, shall be defined as the “CWIL Layer”. The first [ ] in respect of a Named Windstorm of CWIL for which the Reinsurer is not liable for any payment under this Contract shall be defined as the “CWIL Retention”.

The CWIL shall be calculated in accordance with the following:

The “CWIL” means the Original Insured Market Loss (“OIML”) for each Loss Occurrence multiplied by the applicable Payout Factor for each County under consideration calculated using the following formula:

CWIL = ∑c (Pc x Oc)

Where:

Pc = the County Payout Factors for each County C under consideration within the Territorial Scope

Oc = the Original Insured Market Loss for each County C under consideration within the Territorial Scope

Payout Factor means the applicable Payout Factor listed in the Schedule of Payout Factors in the INFORMATION Section (Schedule A) of this Contract.

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Market Reform Contract

With respect to such OIML:

In the event of there being a loss hereon Reinsurers shall accept the figures issued by the Reporting Agency for losses arising within the Territorial Scope and shall exclude:

i) any loss estimate reported by the Reporting Agency and classified in the applicable Catastrophe Bulletin as “Commercial” and “Auto” lines of business;

and

ii) any loss estimate in respect of workers' compensation losses resulting from the same Loss Occurrence, but only to the extent such workers’ compensation loss is expressly reported by the Reporting Agency;

and

iii) any estimated loss adjustment expenses, resulting from the same Loss Occurrence, but only to the extent such loss adjustment expense amounts are expressly reported by the Reporting Agency as forming part of the overall OIML estimate amount.

and

iv) any losses under the National Flood Insurance Program (NFIP), resulting from the same Loss Occurrence, but only to the extent such NFIP amounts are expressly reported by the Reporting Agency as forming part of the overall OIML estimate amount.

b) The final evaluation of the loss shall be the most recent figure published by the Reporting Agency, but not later than the end of the Reporting Period as defined below.

c) The Date of Loss shall be the commencing date of the Loss Occurrence published by the Reporting Agency.

d) In the event of there being a loss hereon both parties agree the figures issued by the Reporting Agency within the Catastrophe Bulletin will be based on established loss reporting methodology in effect at the inception of this Contract. Furthermore, in the event the Reporting Agency change their established methodology during the Period of this Contract to include additional lines of business that may subsequently be reported in an updated, or separate, Catastrophe Bulletin, such additional lines of business shall be disregarded for the purposes of determining whether or not an Original Insured Market Loss satisfies the criterion upon which a recovery is made under this Contract.

e) It is understood and agreed that any publication of loss figures and/or amounts by the Reporting Agency which are indexed or trended to any date other than the original Date of Loss, shall be disregarded for the purposes of this Contract and shall not form the basis of establishing whether or not an Original Insured Market Loss satisfies the criterion or criteria upon which a recovery is made under this Contract.

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In the event that the CWIL under consideration falls below the amount needed to trigger this Contract, or to an amount requiring lesser payment, any excess recoveries paid on the basis of that CWIL shall be refunded within 30 days following the date of such revision; provided, however, that no such refunds shall be made if the CWIL under consideration decreases after the end of the Reporting Period.

Furthermore, in the event that the CWIL under consideration is less than or equal to the amount needed to trigger this Contract and is subsequently revised to an amount greater than that needed to trigger this Contract, the Reinsured may submit its claim under this Contract at the time that such upward revision is made, subject to the Reporting Period.

Moreover, for the avoidance of doubt, should part of the Limit of Liability be eroded by a Loss Occurrence covered hereunder, then it is understood the balance of the of Liability shall remain in force for the remainder of the Contract, subject to the same CWIL calculation and Index Trigger amount as detailed above. An illustrative example of loss recovery under this Contract is provided under Exhibit A of the INFORMATION Section attached hereto and incorporated herein.

The Reinsurer agrees to make provisional payment hereunder once the Reinsured has incurred a loss sufficient to satisfy the Ultimate Net Loss and the CWIL from a qualifying Original Insured Market Loss is sufficient to trigger this Contract.

DEFINITIONS:

“Loss Occurrence” shall mean each and every loss and/or catastrophe and/or calamity and/or occurrence and/or series thereof arising out of and directly occasioned by one event or series of related events and have been assigned an individual and specific catastrophe number by the Reporting Agency with a Date of Loss during the Period and within the Territorial Scope, arising from a Named Windstorm.

“OIML” shall mean Original Insured Market Loss. Original Insured Market Loss shall mean the amount of the estimated insured property damage or losses occurring within the Territorial Scope as shown under the column entitled “Estimated Insurance Payment” of the Catastrophe Bulletin, or such similar heading as may be used in the Catastrophe Bulletin to express the total estimated insurance industry losses, resulting from a Loss Occurrence.

The term “Catastrophe Bulletin” shall mean a catastrophe bulletin originated and disseminated by the Reporting Agency which identifies and assigns a name and/or number to a catastrophic event and/or gives preliminary survey or, subsequently, resurvey estimates of insured property losses arising from a catastrophic event, including through ISOnet PCS (or a comparable notification in the event that a Replacement Reporting Agency is utilised). The term “Catastrophe Bulletin” shall not include bulletins providing only so-called “flash” estimates with respect to any catastrophic event.

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The term “Reporting Period” shall mean that period of time commencing with the inception of the Period, up to and including the final evaluation of the Original Insured Market Loss as published by the Reporting Agency, but in no event, any later than 24 months after the “Date of Loss” for the Original Insured Market Loss, or earlier if the Reporting Agency issues final loss estimates or final resurvey estimates for all Loss Occurrences.

This Contract will not cover the Reinsured for losses with a Date of Loss prior to the inception of the Period. The “Date of Loss” for each Original Insured Market Loss shall be defined as the commencement date as published by the Reporting Agency in the applicable Catastrophe Bulletin.

RELEASE OF

LIABILITIES: If after 15 days following the expiry of the Period and in the reasonable discretion of the Reinsured there is no known Loss Occurrence which would trigger payment under this Contract then both parties shall be fully and finally released of all its liabilities under this Contract.

In the event that the CWIL loss amount:-

(a) as at 3 months following the date of the Loss Occurrence is less than 50% of the Index Trigger, the Reinsurer’s liability is reduced to zero and this shall constitute a full and final release of all liabilities under this Contract.

(b) as at 6 months following the date of the Loss Occurrence is less than 65% of the Index Trigger, the Reinsurer’s liability is reduced to zero and this shall constitute a full and final release of all liabilities under this Contract.

(c) as at 9 months following the date of the Loss Occurrence is less than 75% of the Index Trigger, the Reinsurer’s liability is reduced to zero and this shall constitute a full and final release of all liabilities under this Contract.

(d) as at 12 months following the date of the Loss Occurrence is less than 80% of the Index Trigger, the Reinsurer’s liability is reduced to zero and this shall constitute a full and final release of all liabilities under this Contract.

(e) as at 18 months following the date of the Loss Occurrence is less than 90% of the Index Trigger, the Reinsurer’s liability is reduced to zero and this shall constitute a full and final release of all liabilities under this Contract.

(f) as at 24 months following the date of the Loss Occurrence is less than 100% of the Index Trigger, the Reinsurer’s liability is reduced to zero and this shall constitute a full and final release of all liabilities under this Contract.

If at any point after the expiry of this Contract and less than 24 months following the date of the Loss Occurrence under consideration, the Reporting Agency reports all of the Loss Occurrences as final, the calculation of liability shall occur as of the date all of the Loss Occurrences are deemed final by the Reporting Agency.

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Market Reform Contract

Notwithstanding the foregoing but subject to the Reporting Period, if a Loss Occurrence has occurred, but the Reporting Agency has not yet released an initial estimate for an Original Insured Market Loss for such Loss Occurrence, then this Contract will not be commuted until an Original Insured Market Loss estimate has been published by the Reporting Agency for such Loss Occurrence, after which time the terms and conditions of the Release of Liability provision above will apply.

CONDITIONS: Ultimate Net Loss Clause (including Extra Contractual Obligations covered hereunder), amended to allow the Reinsured to have the sole discretion whether this Contract shall have the benefit of any reinsurances, including those written on a county weighted industry loss, state weighted industry loss or an industry loss basis, if any (Full clause as attached).

Currency Conversion Clause (Full clause as attached).

Offset Clause - As respects premiums and losses under this Contract only (Full clause as attached).

Extra Contractual Obligations Clause (NMX 100) (Full clause as attached).

Insolvency Clause (G86) (Full clause as attached).

Extended Expiration Clause (Full clause as attached).

Amendments and Alterations Clause (Full clause as attached).

Errors and Omissions Clause (Full clause as attached).

Inspection of Records Clause (Full clause as attached).

Notification of Loss Clause (Full clause as attached).

Loss Settlements Clause (Full clause as attached).

Service of Suit Clause (Full clause as attached).

Arbitration Clause (Full clause as attached).

Contracts (Rights of Third Parties) Act 2016 Clarification Clause

(Full clause as attached).

Sanction Limitation and Exclusion Clause (Full clause as attached)

Federal Excise Tax Clause (Full clause as attached).

Intermediary Clause (Full clause as attached).

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MODE OF

EXECUTION

CLAUSE: This Contract may be executed by:

(a) An original written ink signature of paper documents (or a true representation of a signature, such as a rubber-stamp);

(b) A facsimile or scanned copy in PDF format or any alternative secure digital documents format, showing the original written ink signature of paper documents;

(c) Electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person's handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated;

(d) A unique authorisation provided via a secure electronic trading platform;

(e) A timed and dated authorisation provided via an electronic message/system;

The use of any one or a combination of these methods of execution shall constitute a legally binding and valid signing of this Contract. This Contract may be executed in one or more of the above counterparts, each of which, when duly executed, shall be deemed an original.

RECORDING,

TRANSMITTING

AND STORING

INFORMATION: Where the Intermediary maintains risk and claim data/information/documents, the Intermediary may hold data/information/documents electronically.

REINSURER

CONTRACT

DOCUMENTATION: This Contract Document details the terms, clauses, conditions and exclusions agreed between the Reinsured and the Reinsurers as well as setting out administrative arrangements.

SUBJECTIVITIES: It being understood and agreed that this Contract shall exclude any losses arising out of known weather systems existing prior to 9th July, 2024. For the avoidance of doubt, any losses arising out of Hurricane Beryl shall be excluded.

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Attaching to and forming part of Contract Number_U8GR000Z

ULTIMATE NET LOSS CLAUSE

The term “Ultimate Net Loss” shall mean the sum actually paid or payable by the Reinsured in respect of any Loss Occurrence including any appropriate Extra Contractual Obligations (as defined herein) and losses in excess of policy limits (as defined herein), expenses of litigation, if any, and all other loss expenses of the Reinsured (excluding, however, office expenses and salaries of officials of the Reinsured) but salvages shall be first deducted from such Ultimate Net Loss to arrive at the amount of liability, if any, attaching hereunder.

All recoveries, salvages, or payments recovered or received subsequent to a loss settlement under this Contract shall be applied as if recovered or received prior to the aforesaid settlement and all necessary adjustments shall be made by the parties hereto. Provided always that nothing in this clause shall be construed to mean that losses under this Contract are not recoverable until the Reinsured’s Ultimate Net Loss has been ascertained.

It is understood and agreed that underlying recoveries on other excess of loss contracts (as far as applicable) are for the sole benefit of the Reinsured and shall not be taken into account in computing the Ultimate Net Loss or losses in excess of which this Contract attaches, nor in any way prejudice the Reinsured’s right of recovery hereunder.

Notwithstanding anything herein to the contrary, the Reinsured shall have sole discretion to elect that this Contract shall have the benefit of any contract of reinsurance written on a proportional, county weighted industry loss, state weighted industry loss or Industry Loss Basis and, if so, to elect the extent to which this Contract shall so benefit.

For the purposes of this Contract, reinsurance written on an Industry Loss Basis shall mean a reinsurance, whether a contract of indemnity or otherwise, pursuant to which an obligation to pay arises in whole or in part by reference to a modelled loss, industry loss or a parametric trigger.

EXCESS OF POLICY LIMITS

This Contract shall protect the Reinsured, within the limits hereof, where the Ultimate Net Loss includes any loss(es) in excess of policy limits.

The term “loss(es) in excess of policy limits” for the purposes of this Contract will mean awards or settlements in excess of the limits of the policies/contracts reinsured hereunder, but otherwise within the terms of these policies/contracts, incurred because of, but not limited to the following: the failure by or on behalf of the Reinsured to settle within the policy limit, or to provide a defence against such claims, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defence or in the trial of any action against the insured/reinsured or in the preparation or prosecution of an appeal consequent upon such action.

Any loss in excess of policy limits incurred by the Reinsured shall be deemed, in all circumstances, to be a loss from the same event, occurrence, disaster, casualty or claim as covered or alleged to be covered under the policies/contracts reinsured hereunder. Such loss shall also include costs and expenses incurred by the Reinsured in responding to, and where necessary, defending such a claim.

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However, this coverage shall not apply where the loss has been incurred due to fraud by a member of the board of directors or a corporate officer of the Reinsured acting individually or collectively or in collusion with any individual or corporation or any other organisation or party involved in the presentation, defence or settlement of any claim covered hereunder.

REINSTATEMENT CLAUSE

In the event of loss or losses being paid under this Contract, it is hereby mutually agreed to reinstate this Contract up to one full reinstatement of the LIMITS (as set out in the main contract document) hereof from the time of the occurrence of such loss or losses until expiry of this Contract and that for each full reinstatement hereunder an additional premium calculated at pro rata of 100% of the Premium hereon shall be paid by the Reinsured when any loss or losses (or part thereof) requiring such reinstatement hereunder are settled.

It is understood and agreed that each loss recovered hereunder shall be expressed as a percentage of the Reinsurers Limit of Liability as applicable in the LIMITS (as set out in the main contract document) hereof at the time of loss, it being understood and agreed that Reinsurers hereon shall never be liable for more than an aggregate percentage recovery of 100% in respect of each and every Loss Occurrence nor for more than a total aggregate percentage recovery of 200% in all hereunder during the Period hereof.

For the purpose of the foregoing the term “pro rata” shall mean pro rata only as to the fraction of the limit of indemnity hereby reinstated.

For the purpose of this Contract, losses shall be considered in chronological loss date order, but this shall not preclude the Reinsured from making provisional collections in respect of claims which may ultimately not be recoverable hereon.

CURRENCY CONVERSION CLAUSE

It is understood and agreed that loss or losses, if any, paid by the Reinsured in currencies other than United States Dollars shall be converted into United States Dollars at the rates of exchange as used in the Reinsured’s books.

OFFSET CLAUSE

The Reinsured or the Reinsurers may elect to offset any amount, whether on account of premiums, claims or any other amount due from one party to the other in respect of this Contract only and in accordance with the terms and conditions of this Contract.

However, in the event of the insolvency of any party hereto, offset shall only be allowed in accordance with applicable statutes and regulations.

EXTRA CONTRACTUAL OBLIGATIONS INCLUSION CLAUSE (NMX 100)

This Contract shall exclude all cover in respect of Extra Contractual Obligations howsoever arising, such Extra Contractual Obligations being defined as any award made by a court of competent jurisdiction against an insurer or reinsurer, which award is not within the coverage granted by any insurance and/or reinsurance contract made between the parties in dispute.

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Notwithstanding the foregoing this Contract shall extend to cover any loss arising from a Claims Related Extra Contractual Obligation

a) awarded against the Reinsured or

b) incurred by the Reinsured where he has paid his share of a Claims Related Extra Contractual Obligation awarded against one or more of his co-insurers.

It is warranted that any recovery under this Contract in respect of Claims Related Extra Contractual Obligation shall only be for that part of any award which corresponds to the Reinsured's share of the insurance and/or reinsurance policy and/or contract giving rise to the award and all proportional protection effected by the Reinsured shall provide or shall be deemed to provide pro-rata coverage for such obligations.

This Contract shall also extend to cover all loss from Extra Contractual Obligations howsoever arising where the loss is incurred by the Reinsured as a result of his participation in any insurance or reinsurance which provides cover for such loss, it being understood and agreed that such loss results from a contractual liability incurred by the Reinsured.

A "Claims Related Extra Contractual Obligation" shall be defined as the amount awarded against an insurer or reinsurer found liable by a court of competent jurisdiction to pay damages to an insured or reinsured in respect of the conduct of a claim made under an insurance and/or reinsurance policy and/or contract, where such liability has arisen because of:

a) the failure of the insurer or reinsurer to agree or pay a claim within the policy limits or to provide a defence against such claims as required by law or

b) bad faith or negligence in rejecting an offer of settlement or

c) negligence or breach of duty in the preparation of the defence or the conduct of a trial or the preparation or prosecution of any appeal and/or subrogation and/or any subsequent action resulting therefrom.

There shall be no liability under this Contract in respect of:

a) any assumption of liability by way of participation in any mutual scheme designed specifically to cover Extra Contractual Obligations; or

b) any Extra Contractual Obligation arising from the fraud of a director, officer or employee of the Reinsured acting individually or collectively or in collusion with an individual or corporation or with any other organisation or party involved in the presentation, defence or settlement of any claim.

Any loss arising under this Contract in respect of Claims Related Extra Contractual Obligations shall be deemed to be a loss arising from the same event as that giving rise to the claim to which the Claims Related Extra Contractual Obligation is related; but recovery hereunder is subject to the insurance and/or reinsurance policy and/or contract which gives rise to the Claims Related Extra Contractual Obligation falling within the scope of this Contract.

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INSOLVENCY CLAUSE (G86)

Where an Insolvency Event occurs in relation to the Reinsured the following terms shall apply (and, in the event of any inconsistency between these terms and any other terms of this Reinsurance Contract, these terms shall prevail):-

(1) Notwithstanding any requirement in this Reinsurance Contract that the Reinsured shall actually make payment in discharge of its liability to its policyholder before becoming entitled to payment from the Reinsurers:

(a) the Reinsurers shall be liable to pay the Reinsured even though the Reinsured is unable to actually pay, or to discharge its liability to, its policyholder; but

(b) nothing in this clause shall operate to accelerate the date for payment by the Reinsurers of any sum which may be payable to the Reinsured, which sum shall only become payable as and when the Reinsured would have discharged, by actual payment, its liability for its current net loss but for it being the subject of any Insolvency Event.

(2) The existence, quantum, valuation and date for payment of any sum which the Reinsurers are liable to pay the Reinsured under this Reinsurance Contract shall be those and only those for which the Reinsurers would be liable to the Reinsured if the liability of the Reinsured to its policyholders had been determined without reference to any term in any composition or scheme of arrangement or any similar such arrangement, entered into between the Reinsured and all or any part of its policyholders, unless and until the Reinsurers serve written notice to the contrary on the Reinsured in relation to any composition or scheme of arrangement.

(3) The Reinsurers shall be entitled (but not obliged) to set-off, against any sum which they may be liable to pay the Reinsured, any sum for which the Reinsured is liable to pay the Reinsurers.

An Insolvency Event shall occur if:-

(A) (i) (in relation to (1), (2) and (3) above) a winding up petition is presented in respect of the Reinsured or a provisional liquidator is appointed over it or if the Reinsured goes into administration, administrative receivership or receivership or if the Reinsured has a scheme of arrangement or voluntary arrangement proposed in relation to all or any parts of its affairs; or

(ii) (in relation to (1) above) if the Reinsured goes into compulsory or voluntary liquidation;

or, in each case, if the Reinsured becomes subject to any other similar insolvency process (whether under the laws of England and Wales or elsewhere) and

(B) the Reinsured is unable to pay its debts as and when they fall due within the meaning of section 123 of the Insolvency Act 1986 (or any statutory amendment or re-enactment of that section).

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EXTENDED EXPIRATION CLAUSE

If this Contract should expire whilst a Loss Occurrence covered hereunder is in progress, it is understood and agreed that subject to the other conditions of this Contract, the Reinsurers are responsible as if the entire loss or damage had occurred prior to the expiration of the Period, provided that no part of that Loss Occurrence is claimed against any renewal of this Contract.

AMENDMENTS AND ALTERATIONS CLAUSE

It is hereby understood and agreed that any amendments and/or alterations to this Contract that are agreed in writing by the Reinsured and the Reinsurer by Broker's Contract Endorsements shall be automatically binding hereon.

DELAYS, ERRORS AND OMISSIONS CLAUSE

Any inadvertent delay, error or omission on the part of either the Reinsured or the Reinsurers shall not relieve either party from any liability which would have attached hereunder and such error or omission shall be rectified as soon as possible after discovery. Nevertheless, nothing contained in this clause shall be held to override any of the terms and conditions of this Contract, and no liability shall be imposed on either party greater than would have attached hereunder had such delay, error or omission not occurred.

INSPECTION OF RECORDS CLAUSE

For as long as either party remains under any liability hereunder the Reinsured shall, upon request by the Reinsurer, make available at the Reinsured's head office or wherever the same may be located, for inspection at any reasonable time by such representatives as may be authorised by the Reinsurer for that purpose, all information relating to business reinsured hereunder in the Reinsured's possession or under its control and the said representatives may arrange for copies to be made at the Reinsurer's expense of any of the records containing such information as they may require.

NOTIFICATION OF LOSS CLAUSE

The Reinsured undertakes to advise the Reinsurer as soon as possible of any circumstances likely to give rise to a claim hereunder and thereafter keep the Reinsurer fully informed of any material developments regarding the claim.

In satisfaction of the foregoing, the Reinsured shall be deemed to have met its obligations to advise Reinsurers of a potential claim hereunder and to keep the Reinsurers fully informed of any material developments by providing a copy of any applicable Catastrophe Bulletin relating to any Loss Occurrence for each and any Original Insured Market Loss for which recovery is or may be sought under this Contract.

The Reinsured shall upon receiving any formal notification of any loss(es) or occurrence(s) (including any potential loss(es) or occurrence(s)) which may give rise to a claim for recovery hereunder, including upon receipt of any applicable Catastrophe Bulletin, advise Reinsurers as soon as practical after such formal notification is received.

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LOSS SETTLEMENTS CLAUSE

All loss settlements made by the Reinsured shall be binding upon Reinsurers provided such settlements are within the terms and conditions of this Contract, and amounts falling to the share of the Reinsurers shall be payable by them upon reasonable evidence of the amount paid, or payable, being given by the Reinsured.

SERVICE OF SUIT

(Applicable if the Reinsurer is not domiciled in the United States of America, and/or is not authorized in any State, Territory or District of the United States where authorization is required by insurance regulatory authorities)

A. This Clause will not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Clause. This Clause is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Clause for resolving disputes arising out of this Contract.

B. In the event the Reinsurer fails to pay any amount claimed to be due hereunder, the Reinsurer, at the request of the Reinsured, will submit to the jurisdiction of a court of competent jurisdiction within the United States and shall comply with all requirements necessary to give that court jurisdiction. Nothing in this Clause constitutes or should be understood to constitute a waiver of the Reinsurer's rights to commence an action in any court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. The Reinsurer, once the appropriate Court is accepted by the Reinsurer or is determined by removal, transfer or otherwise, as provided for above, will comply with all requirements necessary to give said court jurisdiction and, in any suit instituted against any of the Subscribing Reinsurers upon this Contract, will abide by the final decision of such court or of any appellate court in the event of an appeal.

C. Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, the Reinsurer hereby designates the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his or her successor or successors in office, as its true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Reinsured or any beneficiary hereunder arising out of this Contract.

D. Service of process in such suit may be made upon:

Syndicate 2357

Agent in New York: Lloyd’s America

Attention: Legal Department

280 Park Ave, East Tower, 25th Floor

New York, New York 10017

Markel Bermuda Limited

Agent in New York: CT Corporation System

28 Liberty Street

New York, New York 10005

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Agent in California: CT Corporation System

818 West Seventh Street, Suite 930

Los Angeles, California 90017.

The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit. The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.

ARBITRATION CLAUSE

All disputes and differences arising under or in connection with this Contract shall be referred to arbitration under ARIAS-UK Arbitration Rules.

The arbitration tribunal (the “Tribunal”) shall consist of three arbitrators, one to be appointed by the claimant, one to be appointed by the respondent and the third to be appointed by the two appointed arbitrators.

The third member of the Tribunal shall be appointed as soon as practicable (and no later than 28 days) after the appointment of the two party - appointed arbitrators. The Tribunal shall be constituted upon the appointment of the third arbitrator.

The Arbitrators shall be persons (including those who have retired) with not less than ten years' experience of insurance or reinsurance within the industry or as lawyers or other professional advisers serving the industry.

Furthermore, the arbitrators so appointed shall not have a personal or financial interest in the outcome of the arbitration.

Where a party fails to appoint an arbitrator within 14 days of being called upon to do so or where the two party-appointed arbitrators fail to appoint a third within 28 days of their appointment, then upon application ARIAS-UK will appoint an arbitrator to fill the vacancy. At any time prior to the appointment by ARIAS-UK the party or arbitrators in default may make such appointment.

The Tribunal may in its sole discretion make such orders and directions as it considers to be necessary for the final determination of the matters in dispute. The Tribunal shall have the widest discretion permitted under the law governing the arbitral procedure when making such orders or directions.

Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator.

The seat of arbitration shall be the Tampa, Florida.

The proper law of the arbitration shall be the law of the State of Florida

CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 2016 CLARIFICATION CLAUSE

A person who is not a party to this contract has no right under the Contracts (Rights of Third Parties) Act 2016, or any equivalent local legislation, to enforce any term of this contract but this does not affect any right or remedy of a third party which exists or is available apart from that Act or any equivalent legislation.

SEVERABILITY CLAUSE

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If any provision of this Contract shall be rendered illegal or unenforceable by the laws or regulations of any jurisdiction, such provision shall be considered void in such jurisdiction, but this shall not affect the validity or enforceability of any other provision of this Contract or the enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, in no event shall the operation of this Clause increase the liability of the Reinsurer beyond the scope and Limit of Liability originally agreed upon by the Reinsured and the Reinsurer as set forth in this Contract.

SANCTIONS LIMITATION AND EXCLUSION CLAUSE (LMA3100)

No Reinsurer shall be deemed to provide cover and no Reinsurer shall be liable to pay any claim or provide any benefit hereunder to the extent that the provision of such cover, payment of such claim or provision of such benefit would expose that Reinsurer to any sanction, prohibition or restriction under United Nations resolutions or the trade or economic sanctions, laws or regulations of the European Union, United Kingdom or United States of America.

FEDERAL EXCISE TAX CLAUSE

(Applicable to those Reinsurers who are domiciled outside the United States of America, except Reinsurers exempt from Federal Excise Tax.)

The Reinsurers have agreed to allow for the purpose of paying the Federal Excise Tax, 1% of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax.

In the event of any return of premium becoming due hereunder the Reinsurers will deduct the applicable percentage from the return premium payable hereon and the Reinsured or its agent should take steps to recover the tax from the United States Government.

INTERMEDIARY CLAUSE

Guy Carpenter & Company LLC, Two Alliance Center, 3560 Lenox Road, Suite 2650, Atlanta, GA 30326, USA, Guy Carpenter & Company Limited, Tower Place, London EC3R 5BU and Guy Carpenter Bermuda Limited, Overbay 106 Pitts Bay Road Pembroke, HM 08, Bermuda are hereby jointly recognised as the Intermediaries negotiating this Contract for all business hereunder. All communications (including notices, statements, premiums, return premiums, commissions, taxes, losses, loss expense, salvages, and loss settlements) relating thereto shall be transmitted to the Reinsured or the Reinsurer through Guy Carpenter & Company LLC, Guy Carpenter & Company Limited or Guy Carpenter Bermuda Limited, as applicable. Payments by the Company to the Intermediary shall be deemed payment to the Reinsurer. Payments by the Reinsurer to the Intermediary shall be deemed payment to the Reinsured only to the extent that such payments are actually received by the Reinsured.

EXCLUSIONS

For the avoidance of doubt, the Exclusions hereon apply on the composition of the Reinsured’s Ultimate Net Loss and do not apply to the Original Insured Market Loss. The Reinsurer and Reinsured agree to accept the reported estimates as provided by the Reporting Agency, or Replacement Reporting Agency, as applicable, the exclusions hereon notwithstanding.

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This Contract shall exclude:-

1. Excluding Nuclear Incident and Nuclear Energy Risks for those applicable classes of business and territories as appropriate in accordance with the clauses set out below. Such clauses shall be supplied by the Intermediary negotiating this Contract if requested by either party hereon.

(a) NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE - U.S.A. - NMA 1590 (including amended definition of “Waste”)

(b) NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE - REINSURANCE - U.S.A. - NMA 1119

(c) NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE AND LIABILITY (BOILER AND MACHINERY POLICIES) REINSURANCE - U.S.A. - NMA 1166

2. Notwithstanding any provision to the contrary within this Contract or any endorsement thereto it is agreed that this Contract excludes loss, damage, cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with any of the following regardless of any other cause or event contributing concurrently or in any other sequence to the loss;

(1) war, invasion, acts of foreign enemies, hostilities or warlike operations (whether war be declared or not), civil war, rebellion, revolution, insurrection, civil commotion assuming the proportions of or amounting to an uprising, military or usurped power; or

(2) any act of terrorism.

For the purpose of this endorsement an act of terrorism means an act, including but not limited to the use of force or violence and/or the threat thereof, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organisation(s) or government(s), committed for political, religious, ideological or similar purposes including the intention to influence any government and/or to put the public, or any section of the public, in fear.

This endorsement also excludes loss, damage, cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with any action taken in controlling, preventing, suppressing or in any way relating to (1) and/or (2) above.

If the Reinsurers allege that by reason of this exclusion, any loss, damage, cost or expense is not covered by this Contract the burden of proving the contrary shall be upon the Reinsured.

In the event any portion of this endorsement is found to be invalid or unenforceable, the remainder shall remain in full force and effect.

3. Communicable Disease in accordance with the Limited Communicable Disease Exclusion (Property Treaty Reinsurance) Clause (Based on LMA 5503):

Notwithstanding any provision to the contrary within this Contract, this Contract excludes any loss, damage, liability, claim, cost or expense of whatsoever nature, directly or indirectly caused by, contributed to by, resulting from, arising out of, or in connection with a Communicable Disease or the fear or threat (whether actual or perceived) of a Communicable Disease regardless

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Market Reform Contract

of any other cause or event contributing concurrently or in any other sequence thereto.

Subject to the other terms, conditions and exclusions contained in this Contract, this Contract will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly caused by or arising from a Named Windstorm

Definitions

Communicable Disease means any disease which can be transmitted by means of any substance or agent from any organism to another organism where:

3.1.

the substance or agent includes, but is not limited to, a virus, bacterium, parasite or other organism or any variation thereof, whether deemed living or not, and

3.2.

the method of transmission, whether direct or indirect, includes but is not limited to, airborne transmission, bodily fluid transmission, transmission from or to any surface or object, solid, liquid or gas or between organisms, and

3.3.

the disease, substance or agent can cause or threaten damage to human health or human welfare or can cause or threaten damage to, deterioration of, loss of value of, marketability of or loss of use of property.

Time Element Loss means business interruption, contingent business interruption or any other consequential losses.

4. Cyber risks in accordance with the Cyber Loss Exclusion Clause (Property Treaty Reinsurance) (Based on LMA 5410):-

Notwithstanding any provision to the contrary within this Contract or any endorsement thereto, this Contract excludes all loss, damage, liability, cost or expense of whatsoever nature directly or indirectly caused by, cont7ributed to by, resulting from, arising out of or in connection with:

1.1

any loss of, alteration of, or damage to or a reduction in the functionality, availability or operation of a Computer System, unless subject to the provisions of paragraph 2;

1.2

any loss of use, reduction in functionality, repair, replacement, restoration or reproduction of any Data, including any amount pertaining to the value of such Data.

Definitions

Computer System means any computer, hardware, software, communications system, electronic device (including, but not limited to, smart phone, laptop, tablet, wearable device), server, cloud or microcontroller including any similar system or any configuration of the aforementioned and including any associated input, output, data storage device, networking equipment or back up facility.

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Data means information, facts, concepts, code or any other information of any kind that is recorded or transmitted in a form to be used, accessed, processed, transmitted or stored by a Computer System.

Time Element Loss means business interruption, contingent business interruption or any other consequential losses.

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INFORMATION SECTION

INFORMATION: Schedule of County Payout Factors as per Schedule A attached hereto

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Exhibit A

SAMPLE LOSS CALCULATIONS

The following examples are provided for illustrative purposes only.

If a Named Windstorm Loss Occurrence were to occur in the Territorial Scope, and the resultant CWIL was calculated to be USD 95,000,000, the Limit of Liability of USD 20,700,000 would be multiplied by 50% (((USD 95,000,000 CWIL – USD 50,000,000 Index Trigger) / USD 90,000,000) x the Limit of Liability, for a recovery of USD 10,350,000. For avoidance of confusion, in the event the above referenced percentage exceeds 100%, recovery shall be for the full Limit of Liability (less any amounts previously paid by the Reinsurer to the Reinsured hereunder).

Furthermore, a Named Windstorm Loss Occurrence with a resultant CWIL of USD 50,000,000 or less occurring in the Territorial Scope will not trigger a recovery under this Contract.

If a subsequent Named Windstorm Loss Occurrence were to occur in the Territorial Scope, and the resultant CWIL was calculated to be USD 72,500,000, the Limit of Liability of USD 20,700,000 would be multiplied by 25% (((USD 72,500,000 CWIL – USD 50,000,000 Index Trigger) / USD 90,000,000) x the Limit of Liability, for a recovery of USD 5,175,000. For avoidance of confusion, in the event the above referenced percentage exceeds 100%, recovery shall be for the full Limit of Liability (less any amounts previously paid by the Reinsurer to the Reinsured hereunder).

Moreover, for the avoidance of doubt, should part of the Limit of Liability be paid out due to one or more Loss Occurrences covered hereunder, then it is understood the balance of the Limit of Liability shall remain in force for the remainder of this Contract, subject to the Reinstatement Provisions and Reinstatement Clause herein. In the above example, following a qualifying Named Windstorm loss with a CWIL of USD 95,000,000 and a subsequent qualifying Named Windstorm loss with a CWIL of USD 72,500,000, then USD 25,875,000 of aggregate limit remains on risk until the expiry of this Contract at 31st May 2025, subject to USD 20,700,000 Limit of Liability each and every Loss Occurrence.

Note: The examples are for information purposes only and should not be relied upon and do not represent all possible loss scenarios.

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Schedule A – County Payout Factors

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SUBSCRIPTION AGREEMENT SECTION

CONTRACT LEADER: NAUTICAL MANAGEMENT LTD. ON BEHALF OF MARKEL BERMUDA LIMITED.

BASIS OF AGREEMENT

TO CONTRACT CHANGES: Additions, deletions and/or other amendments, alterations, modifications and Special Acceptances are to be agreed by ALL REINSURERS hereon (each in respect of its own participation only).

CLAIMS AGREEMENT

PARTIES: All Reinsurers each in respect of their own participation only.

BASIS OF CLAIMS

AGREEMENT: Claims Agreement Procedures:

Non-Bureau Reinsurers to agree claims, each in respect of their own participation only, subject to their own practices.

NON- BUREAU

ARRANGEMENTS: Applicable only to those Reinsurers being Companies hereon (whose participations are not evidenced by a Bureau stamp).

On behalf of the above, this Document constitutes the definitive record of this Reinsurance Contract. Accordingly, no formal Policy shall be issued.

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FISCAL AND REGULATORY SECTION

TAXES PAYABLE BY

REINSURERS: Statutory Federal Excise Tax per U.S.A. Internal Revenue Service regulations, if applicable. Percentage as specified by United States law.

COUNTRY OF ORIGIN: United States of America

OVERSEAS BROKER: Direct Reinsured.

U.S CLASSIFICATION: US Reinsurance

NAIC CODE:

ALLOCATION OF

PREMIUM TO CODING: Lloyd’s Risk Code: N/A

No accounting splits required.

REGULATORY CLIENT

CLASSIFICATION: Reinsurance.

REGULATORY RISK

LOCATION: United States of America.

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BROKER REMUNERATION AND DEDUCTIONS SECTION

TAXES PAYABLE BY

REINSURERS: None.

RETAIL

BROKERAGE: 10% (5% on Reinstatement).

WHOLESALE

BROKERAGE: None.

OTHER

DEDUCTIONS

FROM PREMIUM: None.

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SECURITY DETAILS SECTION

REINSURERS’

LIABILITY: LMA3333

(RE)INSURERS LIABILITY CLAUSE

(Re)insurer’s liability several not joint

The liability of a (re)insurer under this Reinsurance Contract is several and not joint with other (re)insurers party to this Reinsurance Contract. A (re)insurer is liable only for the proportion of liability it has underwritten. A (re)insurer is not jointly liable for the proportion of liability underwritten by any other (re)insurer. Nor is a (re)insurer otherwise responsible for any liability of any other (re)insurer that may underwrite this Reinsurance Contract.

The proportion of liability under this Reinsurance Contract underwritten by a (re)insurer (or, in the case of a Lloyd’s syndicate, the total of the proportions underwritten by all the members of the syndicate taken together) is shown next to its stamp. This is subject always to the provision concerning “signing” below.

In the case of a Lloyd’s syndicate, each member of the syndicate (rather than the syndicate itself) is a (re)insurer. Each member has underwritten a proportion of the total shown for the syndicate (that total itself being the total of the proportions underwritten by all the members of the syndicate taken together). The liability of each member of the syndicate is several and not joint with other members. A member is liable only for that member’s proportion. A member is not jointly liable for any other member’s proportion. Nor is any member otherwise responsible for any liability of any other (re)insurer that may underwrite this Reinsurance Contract. The business address of each member is Lloyd’s, One Lime Street, London EC3M 7HA. The identity of each member of a Lloyd’s syndicate and their respective proportion may be obtained by writing to Market Services, Lloyd’s, at the above address.

Proportion of liability

Unless there is “signing” (see below), the proportion of liability under this Reinsurance Contract underwritten by each (re)insurer (or, in the case of a Lloyd’s syndicate, the total of the proportions underwritten by all the members of the syndicate taken together) is shown next to its stamp and is referred to as its “written line”.

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REINSURERS’

LIABILITY:

(Continued) LMA3333

Where this Reinsurance Contract permits, written lines, or certain written lines, may be adjusted (“signed”). In that case a schedule is to be appended to this Reinsurance Contract to show the definitive proportion of liability under this Reinsurance Contract underwritten by each (re)insurer (or, in the case of a Lloyd’s syndicate, the total of the proportions underwritten by all the members of the syndicate taken together). A definitive proportion (or, in the case of a Lloyd’s syndicate, the total of the proportions underwritten by all the members of a Lloyd’s syndicate taken together) is referred to as a “signed line”. The signed lines shown in the schedule will prevail over the written lines unless a proven error in calculation has occurred.

Although reference is made at various points in this clause to “this Reinsurance Contract” in the singular, where the circumstances so require this should be read as a reference to contracts in the plural.

ORDER HEREON: 100% of 100% (being USD 20,700,000, the Limit of Liability per Loss Occurrence).

BASIS OF WRITTEN LINES: Percentages of Whole.

SIGNING

PROVISIONS: In the event that the written lines hereon exceed 100% of the order, any lines written “To Stand” will be allocated in full and all other lines will be signed down in equal proportions so that the aggregate signed lines are equal to 100% of the order without further agreement of any of the Reinsurers.

However:

a) in the event that the placement of the order is not completed by the commencement date of the Period of reinsurance then all lines written by that date will be signed in full,

b) the Reinsured may elect for the disproportionate signing of Reinsurers’ lines, without further specific agreement of Reinsurers, providing that any such variation is made prior to the commencement date of the Period of reinsurance, and that lines written “To Stand” may not be varied without the documented agreement of those Reinsurers,

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SIGNING

PROVISIONS:

(Continued)

c) the signed lines resulting from the application of the above provisions can be varied, before or after the commencement date of the Period of reinsurance, by the documented agreement of the Reinsured and all Reinsurers whose lines are to be varied. The variation to the contracts will take effect only when all such Reinsurers have agreed, with the resulting variation in signed lines commencing from the date set out in that agreement.

Reinsurer’s evidence of participation including their written lines are evidenced on the following pages.

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REINSURED SIGNING PAGE

ATTACHING TO AND FORMING PART OF

CONTRACT

U8GR000Z

The Reinsured hereby agrees to the terms and conditions as contained in this Reinsurance Contract.

The Reinsured, being

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC., Tampa, Florida

Signed in this day of July 2024

For and on behalf of Reinsured.

Authorised Signature(s) _____________________________

Ref. No. _____________________________

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REINSURER SIGNING PAGE

ATTACHING TO AND FORMING PART OF

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.,

Tampa, Florida

COUNTY WEIGHTED INDUSTRY LOSS (CWIL) REINSURANCE CONTRACT

U8GR000Z

________________________________________________________

The Reinsurer named below hereby agrees to the terms and conditions of this Reinsurance Contract in respect of the participation as stated below:

Reinsurer Name: NAUTICAL MANAGEMENT LTD. ON BEHALF OF MARKEL BERMUDA LIMITED

Written

Participation: 70% of 100%.

Reference:

Signed in Bermuda on this day of July, 2024

Signed

Participation: 70% of 100%.

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REINSURER SIGNING PAGE

ATTACHING TO AND FORMING PART OF

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.,

Tampa, Florida

COUNTY WEIGHTED INDUSTRY LOSS (CWIL) REINSURANCE CONTRACT

U8GR000Z

________________________________________________________

The Reinsurer named below hereby agrees to the terms and conditions of this Reinsurance Contract in respect of the participation as stated below:

Reinsurer Name: NAUTICAL MANAGEMENT LTD. ON BEHALF OF SYNDICATE 2357 AT LLOYD’S

Written

Participation: 30% of 100%.

Reference:

Signed in Bermuda on this day of July, 2024

Signed

Participation: 30% of 100%.

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EX-10.15 9 hci-ex10_15.htm EX-10.15 EX-10.15

EXHIBIT 10.15. Certain identified information has been excluded from this exhibit because it is immaterial and would be competitively harmful if publicly disclosed. Information that has been omitted is indicated with brackets.

EXHIBIT 10.15

PANHANDLE NAMED STORM PROPERTY CATASTROPHE
EXCESS OF LOSS REINSURANCE CONTRACT

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

PANHANDLE NAMED STORM PROPERTY CATASTROPHE
EXCESS OF LOSS REINSURANCE CONTRACT

TABLE OF CONTENTS


Article	Preamble	Page
	Preamble		4
1	Business Covered	4
2	Retention and Limit	4
3	Term	5
4	Special Termination	5
5	Territory	7
6	Exclusions	7
7	Special Acceptance	8
8	Premium	9
9	Reinstatement	9
10	Definitions	10
11	Extra Contractual Obligations/Excess of Policy Limits	11
12	Net Retained Liability	12
13	Original Conditions	13
14	No Third Party Rights	13
15	Notice of Loss and Loss Settlements	13
16	Late Payments	14
17	Offset	15
18	Currency	15
19	Unauthorized Reinsurance	15
20	Taxes	18
21	Access to Records	18
22	Confidentiality	19
23	Indemnification and Errors and Omissions	20
24	Insolvency	20
25	Run-Off Reinsurer	21
26	Arbitration	23
27	Expedited Arbitration	24
28	Service of Suit	24
29	Governing Law	25
30	Entire Agreement	26
31	Non-Waiver	26
32	Sanction Limitation and Exclusion Clause	26
33	Intermediary	26
34	Mode of Execution	27
	Company Signing Block	28

PANHANDLE NAMED STORM PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

TABLE OF CONTENTS


Attachments		Page
	Pools, Associations & Syndicates Exclusions Clause	29
	Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A.	32
	Terrorism Exclusion	34
	Limited Communicable Disease Exclusion (Property Treaty Reinsurance)	35
	Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance)	36
	Trust Agreement Requirements Clause	37

PANHANDLE NAMED STORM PROPERTY CATASTROPHE
EXCESS OF LOSS REINSURANCE CONTRACT

(the “Contract”)
issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY

INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

(collectively, the “Company”)

THE SUBSCRIBING REINSURER(S) IDENTIFIED IN THE
INTERESTS AND LIABILITIES AGREEMENT(S) ATTACHED TO
AND FORMING PART OF THIS CONTRACT

(the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Company in respect of its net excess liability as a result of any loss or losses which may occur during the term of this Contract under any Policies in force at the effective date hereof or issued or renewed on or after that date, covering direct and assumed business classified by the Company as the property perils of Business Owners, Homeowners, Condominium Owners, Renters and Dwelling, subject to the terms and conditions herein contained. Notwithstanding the foregoing, coverage hereunder shall be limited to loss or losses arising out of Named Storm as defined in the Definitions Article.

ARTICLE 2

RETENTION AND LIMIT

ARTICLE 3

TERM

This Contract shall take effect at 12:01 a.m., Eastern Time, July 1, 2024, and unless terminated prior to that time and date as provided in the Special Termination Article, shall remain in effect until 12:01 a.m., Eastern Time, June 1, 2025, applying to Loss Occurrences commencing during the term of this Contract.

ARTICLE 4

SPECIAL TERMINATION

The Subscribing Reinsurer ceases underwriting operations.

A state insurance department or other legal authority orders the Subscribing Reinsurer to cease writing business, or the Subscribing Reinsurer is placed under regulatory supervision.

The Subscribing Reinsurer has become insolvent or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, trustee in bankruptcy, or other agent known by whatever name, to take possession of its assets or control of its operations.

The Subscribing Reinsurer’s policyholders’ surplus (or the equivalent under the Subscribing Reinsurer’s accounting system) as reported in such financial statements of the Subscribing Reinsurer as designated by the Company, has been reduced by 20% of the amount thereof at any date during the prior 12-month period (including the period prior to the inception of this Contract).

The Subscribing Reinsurer has become, or has announced its intention to become, merged with or acquired or controlled by any company, corporation, or individual(s) not controlling the Subscribing Reinsurer’s operations at the inception of this Contract.

The Subscribing Reinsurer has retroceded its entire liability under this Contract without the Company’s prior written consent, except for retrocessions to members of the Subscribing Reinsurer’s holding company group.

The Subscribing Reinsurer has been assigned an A.M. Best’s rating of less than “A-” and/or an S&P rating of less than “BBB+.” However, as respects Underwriting Members of Lloyd’s, London, a Lloyd’s Market Rating of less than “A-” by A.M. Best and/or less than “BBB+” by S&P shall apply.

The Subscribing Reinsurer has hired an unaffiliated runoff claims manager that is compensated on a contingent basis or is otherwise provided with financial incentives based on the quantum of claims paid.

The Subscribing Reinsurer has in any other way assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

10.

The Subscribing Reinsurer has failed to post or maintain required collateral to secure its obligations as required under this Contract, and has not cured such deficiency within 30 days following written notice thereof from the Company.

Termination shall be effected on a cut-off basis and the Subscribing Reinsurer shall have no liability for Loss Occurrences commencing after the date of termination. The reinsurance premium due the Subscribing Reinsurer hereunder (including any minimum reinsurance premium) shall be prorated based on the period of the Subscribing Reinsurer’s participation hereon, and the Subscribing Reinsurer shall immediately return any excess reinsurance premium received. Reinstatement premium, if any, shall be calculated based on the Subscribing Reinsurer’s reinsurance premium earned during the period of the Subscribing Reinsurer’s participation hereon.

Additionally, in the event of any of the circumstances listed in paragraph A of this Article, the Company shall have the option to commute the Subscribing Reinsurer’s liability for losses on Policies covered by this Contract. In the event the Company and the Subscribing Reinsurer cannot agree on the commutation amount, they shall appoint an actuary and/or appraiser to assess such amount and shall share equally any expense of the actuary and/or appraiser. If the Company and the Subscribing Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Subscribing Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Subscribing Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties in respect of liability arising from the Subscribing Reinsurer’s participation under this Contract.

The Company’s option to require commutation under paragraph C above shall survive the termination or expiration of this Contract.

ARTICLE 5

TERRITORY

This Contract shall apply to Policies issued in the Counties of Bay, Calhoun, Escambia, Franklin, Gadsden, Gulf, Holmes, Jackson, Jefferson, Leon, Liberty, Okaloosa, Santa Rosa, Wakulla, Walton and Washington within the State of Florida.

ARTICLE 6

EXCLUSIONS

A. This Contract shall not apply to and specifically excludes:

Flood when written as such.

Earthquake for standalone Policies where earthquake is the only named peril.

Hail damage to an insured’s growing or standing crops.

Reinsurance assumed by the Company under obligatory reinsurance agreements, except intercompany reinsurance between the Company and its affiliates and reinsurance where the Policies involved are to be re-underwritten in accordance with the underwriting standards of the Company and reissued as Policies of the Company in due course.

Pools, Associations & Syndicates, per the attached exclusion.

Liability of the Company arising by contract, operation of law, or otherwise, from its participation or membership, whether voluntary or involuntary, in any Insolvency Fund. “Insolvency Fund” includes any guaranty fund, insolvency fund, plan, pool, association, fund or other arrangement, howsoever denominated, established or governed, that provides for any assessment of or payment or assumption by the Company of part or all of any claim, debt, charge, fee, or other obligation of an insurer, or its successors or assigns, that has been declared by any competent authority to be insolvent, or that is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

Loss or damage occasioned by war, invasion, hostilities, acts of foreign enemies, civil war, rebellion, insurrection, military or usurped power, martial law, or confiscation by order of any government or public authority, but not excluding loss or damage that would be covered under a standard form of Policy containing a standard war exclusion clause.

Losses excluded by the attached Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance – U.S.A.

Terrorism as defined in the attached Terrorism Exclusion.

10.

Mold unless directly resulting from an otherwise covered peril.

11.

Loss and/or damage and/or costs and/or expenses arising from seepage and/or pollution and/or contamination, other than contamination from smoke. Nevertheless, this exclusion does not preclude payment of the cost of removing debris of property damaged by a loss otherwise covered hereunder, subject always to a limit of 25.0% of the Company’s property loss under the applicable original Policy.

12.

Financial guarantee and insolvency.

13.

Loss or damage to overhead transmission and distribution lines, including supporting structures, of electrical companies, telephone companies, and cable companies. This exclusion shall not apply, however, to transmission and distribution lines and their supporting structures located on the property of any original insured or within 1,000 feet thereof.

14.

Losses excluded by the attached Communicable Disease Exclusion (Property Treaty Reinsurance).

15.

Loss Excluded by the attached Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance).

16.

Policies written by TypTap Insurance Company.

With the exception of subparagraphs A(6), A(7), A(8), A(9), A(12), A(14) and A(15) above, should any judicial, regulatory or legislative entity having legal jurisdiction invalidate any exclusion on the Company's Policy, any amount of loss for which the Company is liable because of such invalidation will not be excluded hereunder.

With the exception of subparagraphs A(6), A(7), A(8), A(9), A(12), A(14) and A(15) above, if the Company inadvertently issues a Policy falling within the scope of one or more of the exclusions, such Policy shall be covered hereunder, provided that the Company issues, or causes to be issued, the required notice of cancellation within 30 days after a member of the executive or managerial staff at the Company’s home office having underwriting authority in the class of business involved becomes aware that the Policy applies to excluded classes, unless the Company is prevented from canceling said Policy within such period by applicable statute or regulation, in which case such Policy shall be covered hereunder until the earliest date on which the Company may cancel.

ARTICLE 7

SPECIAL ACCEPTANCE

The Reinsurer shall be deemed to have accepted a risk, if it has not responded within five business days after receiving the underwriting information on such risk. Any renewal of a special acceptance agreed to for a predecessor contract to this Contract, shall automatically be covered hereunder.

ARTICLE 8

PREMIUM

The Company shall pay the Reinsurer a Deposit Premium of [ ] for the term of this Contract, to be paid in the amount of [ ] on July 1, 2024, September 1, 2024, January 1, 2025, and April 1, 2025.

Within 45 days following the expiration of this Contract, the Company shall provide the Reinsurer with a report showing the Company’s final Total Insured Value. The final Total Insured Value shall be multiplied by the Final Adjusted Premium Rate of [ ]. Should this amount be greater than or equal to [ ] and less than or equal to [ ] of the Deposit Premium as set forth above, there shall be no additional or return premium due. Should the amount so calculated exceed [ ] of the Deposit Premium paid in accordance with paragraph A above, the Company shall immediately pay the Reinsurer the difference in excess of [ ] of the Deposit Premium. Should the amount so calculated be less than [ ] of the Deposit Premium paid in accordance with paragraph A of this Article, the Reinsurer shall immediately pay the Company the difference below [ ] of the Deposit Premium, subject to the Minimum Premium of [ ].

“Total Insured Value” means the Company’s aggregate wind exposures on September 30, 2024 for business covered hereunder.

The estimated Total Insured Value is $3,108,194,785.

The Company shall furnish the Reinsurer with such reasonably available information as may be reasonably required by the Reinsurer for completion of the Reinsurer’s financial statements.

ARTICLE 9

REINSTATEMENT

Nevertheless, the Reinsurer’s liability shall not exceed such limit(s) in respect of any one Loss Occurrence, nor the applicable limit(s) in respect of all Loss Occurrences commencing during the term of this Contract, as set forth in the Retention and Limit Article.

ARTICLE 10

DEFINITIONS

Salvages and all recoveries (including amounts due from all reinsurances that inure to the benefit of this Contract, whether recovered or not), shall be first deducted from such loss to arrive at the amount of liability attaching hereunder.

All salvages, recoveries or payments recovered or received subsequent to loss settlement hereunder shall be applied as if recovered or received prior to the aforesaid settlement, and all necessary adjustments shall be made by the parties hereto.

The Company shall be deemed to be “liable to pay” a loss when a judgment has been rendered that the Company does not plan to appeal, and/or the Company has obtained a release, and/or the Company has accepted a proof of loss, and/or the Company has made a commitment to pay, and/or the Company has scheduled the payment of a loss.

Nothing in this clause shall be construed to mean that losses are not recoverable hereunder until the Company’s “Ultimate Net Loss” has been ascertained.

court costs;

costs of supersedeas and appeal bonds;

monitoring counsel expenses;

legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including but not limited to declaratory judgment actions; pre-judgment interest, unless included as part of an award or judgment;

post-judgment interest;

a pro rata share of salaries and expenses of Company field employees, calculated in accordance with the time occupied in adjusting such loss, and expenses of other Company employees who have been temporarily diverted from their normal and customary duties and assigned to the field adjustment of losses covered by this Contract; and

subrogation, salvage and recovery expenses.

“Loss Adjustment Expense” does not include salaries and expenses of the Company’s employees, except as provided in subparagraph (7) above, and office and other overhead expenses.

“Loss Occurrence” means all individual losses sustained by the Company arising out of and directly occasioned by such “Named Storm.” “Named Storm” means any storm or storm system declared by the US National Hurricane Center, US Central Pacific Hurricane Center, US Weather Prediction Center, or their successor organizations, all being divisions of the US National Weather Service to be a tropical storm or hurricane, and any successors thereof. A storm or storm system that merges with a “Named Storm” shall be considered part of that “Named Storm.” A “Named Storm” shall be deemed to begin at the effective time and date of the first watch, warning or other official advisory applicable to such tropical storm or hurricane issued by the above referenced governmental meteorological agencies. A “Named Storm” shall be deemed to end 72 hours after the cancellation of the last watch, warning or other official advisory applicable to such tropical storm, hurricane or successor, issued by the above referenced governmental meteorological agencies irrespective of the duration of the timing or spacing between such watches, warnings or other official advisories. If two or more storms are assigned different names by the above referenced governmental meteorological agencies, each of those storms shall constitute a separate event for purposes of this definition.

“Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the Company.

ARTICLE 11

EXTRA CONTRACTUAL OBLIGATIONS/EXCESS OF POLICY LIMITS

A. This Contract shall cover Extra Contractual Obligations, as provided in the definition of Ultimate Net Loss.

“Extra Contractual Obligations” shall be defined as those liabilities not covered under any other provision of this Contract and that arise from the handling of any claim on business covered hereunder, such liabilities arising because of, but not limited to, the following: failure by the Company to settle within the Policy limit, or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action.

This Contract shall cover Loss in Excess of Policy Limits, as provided in the definition of Ultimate Net Loss. “Loss in Excess of Policy Limits” shall be defined as Loss in excess of the Policy limit, having been incurred because of, but not limited to, failure by the Company to settle within the Policy limit or by reason of alleged or actual negligence, fraud or bad faith in rejecting an offer of settlement or in the preparation of the defense or in the trial of any action against its insured or reinsured or in the preparation or prosecution of an appeal consequent upon such action.

An Extra Contractual Obligation and/or Loss in Excess of Policy Limits shall be deemed to have occurred on the same date as the loss covered under the Company’s Policy, and shall constitute part of the original loss.

For the purposes of the Loss in Excess of Policy Limits coverage hereunder, the word “Loss” shall mean any amounts for which the Company would have been contractually liable to pay had it not been for the limit of the original Policy.

Loss Adjustment Expense in respect of Extra Contractual Obligations and/or Loss in Excess of Policy Limits shall be covered hereunder in the same manner as other Loss Adjustment Expense.

However, this Article shall not apply where the loss has been incurred due to final legal adjudication of fraud of a member of the Board of Directors or a corporate officer of the Company acting individually or collectively or in collusion with any individual or corporation or any other organization or party involved in the presentation, defense or settlement of any claim covered hereunder.

In no event shall coverage be provided to the extent not permitted under law.

ARTICLE 12

NET RETAINED LIABILITY

This Contract applies only to that portion of any loss that the Company retains net for its own account (prior to deduction of any reinsurance that inures solely to the benefit of the Company).

The amount of the Reinsurer’s liability hereunder in respect of any loss or losses shall not be increased by reason of the inability of the Company to collect from any other reinsurer(s), whether specific or general, any amounts that may have become due from such reinsurer(s), whether such inability arises from the insolvency of such other reinsurer(s) or otherwise.

ARTICLE 13

ORIGINAL CONDITIONS

ARTICLE 14

NO THIRD PARTY RIGHTS

ARTICLE 15

NOTICE OF LOSS AND LOSS SETTLEMENTS

The Company shall advise the Reinsurer promptly if paid and estimated Ultimate Net Loss is in excess of 75% of the Company’s retention, or if, in the opinion of the Company, such Ultimate Net Loss may result in a claim hereunder. Thereafter, the Company shall advise the Reinsurer, at least monthly, of all subsequent developments thereto that may materially affect the position of the Reinsurer.

The Company alone and at its full discretion shall adjust, settle or compromise all claims and losses.

As respects losses subject to this Contract, all loss settlements made by the Company, whether under strict Policy terms or by way of compromise, and any Extra Contractual Obligations and/or Loss in Excess of Policy Limits, shall be binding upon the Reinsurer. The Reinsurer agrees to pay or allow, as the case may be, its share of each such settlement immediately upon receipt of reasonable evidence of the amount paid by the Company or that the Company estimates it will pay within the next 14 days. Within 30 days after receipt of the Reinsurer’s payment, the Company shall report to the Reinsurer the Reinsurer’s payment, minus the Reinsurer’s share of losses subject to this Contract that the Company has paid, or become liable to pay, as of the date of the report. Any positive difference shall be remitted to the Reinsurer with the Company’s report.

ARTICLE 16

LATE PAYMENTS

The number of full days that have expired since the overdue date or the last monthly calculation, whichever the lesser; times

1/365th of the sum of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made, plus 1%; times

The amount past due, including accrued interest.

Interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

B. The due date shall, for purposes of this Article, be determined as follows:

Payments from the Reinsurer to the Company shall be due on the date on which the demand for payment (including delivery of bordereaux or quarterly or monthly reports) is received by the Reinsurer, and shall be overdue 30 days thereafter.

Payments from the Company to the Reinsurer shall be due on the dates specified within this Contract. Payments shall be overdue 30 days thereafter except for the first installment of premium, if applicable, which shall be overdue 60 days from inception or 30 days from final line-signing, whichever the later. Reinstatement premium, if applicable, shall have as a due date the date when the Company receives payment for the claim giving rise to such reinstatement premium, and payment shall be overdue 30 days thereafter. In the event a due date is not specifically stated for a given payment, the overdue date shall be 30 days following the date of billing.

In the event arbitration is necessary to settle a dispute, the panel shall have the authority to make a determination awarding interest to the prevailing party. Interest, if any, awarded by the panel shall supersede the interest amounts outlined herein.

Any interest owed pursuant to this Article may be waived by the party to which it is owed. Waiver of such interest, however, shall not affect the waiving party’s rights to other interest amounts due as a result of this Article.

ARTICLE 17

OFFSET

ARTICLE 18

CURRENCY

Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars, and all payments hereunder shall be in United States Dollars.

For purposes of this Contract, where the Company receives premiums or pays losses in currencies other than United States Dollars, such premiums or losses shall be converted into United States Dollars at the actual rates of exchange at which these premiums or losses are entered in the Company’s books.

ARTICLE 19

UNAUTHORIZED REINSURANCE

A. This Article applies:

only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, or

to a Subscribing Reinsurer qualified as a reciprocal jurisdiction reinsurer with any such insurance regulatory authority in the event such Subscribing Reinsurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the Company or by its legal successor on behalf of its resolution estate, in which case such Subscribing Reinsurer shall fund 100% of its share of the Reinsurer’s Obligations as hereinafter provided.

unearned premium (if applicable);

known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;

losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;

losses incurred but not reported and Loss Adjustment Expense relating thereto;

all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.

1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;

to make refund of any sum that is in excess of the actual amount required to pay the Reinsurer’s Obligations under this Contract (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement);

to fund an account with the Company for the Reinsurer’s Obligations. Such cash deposit shall be held in an interest bearing account separate from the Company’s other assets, and interest thereon not in excess of the prime rate shall accrue to the benefit of the Reinsurer. Any taxes payable on accrued interest shall be paid out of the assets in the account that are in excess of the Reinsurer’s Obligations (or in excess of 102% of the Reinsurer’s Obligations, if funding is provided by a Trust Agreement). If the assets are inadequate to pay taxes, any taxes due shall be paid or reimbursed by the Reinsurer;

to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

If the amount drawn by the Company is in excess of the actual amount required for subparagraph E(1) or E(3), or in the case of subparagraph E(4), the actual amount determined to be due, the Company shall promptly return to the Reinsurer the excess amount so drawn. All of the foregoing shall be applied without diminution because of insolvency on the part of the Company or the Reinsurer.

The issuing bank shall have no responsibility whatsoever in connection with the propriety of withdrawals made by the Company or the disposition of funds withdrawn, except to ensure that withdrawals are made only upon the order of properly authorized representatives of the Company.

At annual intervals, or more frequently at the discretion of the Company, but never more frequently than quarterly, the Company shall prepare a specific statement of the Reinsurer’s Obligations for the sole purpose of amending the LOC or other method of funding, in the following manner:

If the statement shows that the Reinsurer’s Obligations exceed the balance of the LOC, as of the statement date, the Reinsurer shall, within 30 days after receipt of the statement, secure delivery to the Company of an amendment to the LOC increasing the amount of credit by the amount of such difference. Should another method of funding be used, the Reinsurer shall, within the time period outlined above, increase such funding by the amount of such difference.

If, however, the statement shows that the Reinsurer’s Obligations are less than the balance of the LOC (or that 102% of the Reinsurer’s Obligations are less than the trust account balance if funding is provided by a Trust Agreement), as of the statement date, the Company shall, within 30 days after receipt of written request from the Reinsurer, release such excess credit by agreeing to secure an amendment to the LOC reducing the amount of credit available by the amount of such excess credit. Should another method of funding be used, the Company shall, within the time period outlined above, decrease such funding by the amount of such excess.

ARTICLE 20

TAXES

In consideration of the terms under which this Contract is issued, the Company undertakes not to claim any deduction of the premium hereon when making Canadian tax returns or when making tax returns, other than Income or Profits Tax returns, to any state or territory of the United States of America or to the District of Columbia.

1. Each Subscribing Reinsurer has agreed to allow, for the purpose of paying the Federal Excise Tax, the applicable percentage of the premium payable hereon (as imposed under the Internal Revenue Code) to the extent such premium is subject to Federal Excise Tax.

2. In the event of any return of premium becoming due hereunder, the Subscribing

Reinsurer shall deduct the applicable percentage of the premium from the amount of the return, and the Company or its agent should take steps to recover the Tax from the U.S. Government.

ARTICLE 21

ACCESS TO RECORDS

The Reinsurer or its duly authorized representatives shall have the right to visit the offices of the Company to inspect, examine, audit, and verify any of the policy, accounting or claim files (“Records”) relating to business reinsured under this Contract during regular business hours after giving five working days’ prior notice. This right shall be exercisable during the term of this Contract or after the expiration of this Contract. Notwithstanding the above, the Reinsurer shall not have any right of access to the Records of the Company if it is not current in all undisputed payments due the Company.

Notwithstanding the above, the Company reserves the right to withhold from the Reinsurer any Privileged Documents. However, the Company shall permit and not object to the Reinsurer’s access to Privileged Documents in connection with the underlying claim reinsured hereunder following final settlement or final adjudication of the case or cases involving such claim, with prejudice against all claimants and all parties to such adjudications; the Company may defer release of such Privileged Documents if there are subrogation, contribution, or other third party actions with respect to that claim or case, and the Company’s defense might be jeopardized by release of such Privileged Documents. In the event that the Company seeks to defer release of such Privileged Documents, it shall, in consultation with the Reinsurer, take other steps as reasonably necessary to provide the Reinsurer with the information it reasonably requires to indemnify the Company without causing a loss of such privileges or protections. The Reinsurer shall not have access to Privileged Documents relating to any dispute between the Company and the Reinsurer.

For purposes of this Article:

“Privileged Documents” means any documents that are Attorney-Client Privilege Documents and/or Work Product Privilege Documents.

“Attorney-Client Privilege Documents” means communications of a confidential nature between (a) the Company, or anyone retained by or at the direction of the Company, or its in-house or outside legal counsel, or anyone in the control of such legal counsel, and (b) any in-house or outside legal counsel, if such communications relate to legal advice being sought by the Company and/or contain legal advice being provided to the Company.

“Work Product Privilege Documents” means communications, written materials and tangible things prepared by or for in-house or outside counsel, or prepared by or for the Company, in anticipation of or in connection with litigation, arbitration, or other dispute resolution proceedings.

ARTICLE 22

CONFIDENTIALITY

are publicly known or have become publicly known through no unauthorized act of the Reinsurer;

have been rightfully received from a third person without obligation of confidentiality; or

were known by the Reinsurer prior to the placement of this Contract without an obligation of confidentiality.

when required by retrocessionaires as respects business ceded to this Contract;

when required by regulators performing an audit of the Reinsurer’s records and/or financial condition; or

when required by external auditors performing an audit of the Reinsurer’s records in the normal course of business.

Further, the Reinsurer agrees not to use any Confidential Information for any purpose not related to the performance of its obligations or enforcement of its rights under this Contract.

Notwithstanding the above, in the event that the Reinsurer is required by court order, other legal process or any regulatory authority to release or disclose any or all of the Confidential Information, the Reinsurer agrees to provide the Company with written notice of same at least 10 days prior to such release or disclosure and to use its best efforts to assist the Company in maintaining the confidentiality provided for in this Article.

The provisions of this Article shall extend to the officers, directors and employees of the Reinsurer and its affiliates, and shall be binding upon their successors and assigns.

ARTICLE 23

INDEMNIFICATION AND ERRORS AND OMISSIONS

A. The Reinsurer is reinsuring, subject to the terms and conditions of this Contract, the obligations of the Company under any Policy. The Company shall be the sole judge as to:

what shall constitute a claim or loss covered under any Policy;

the Company’s liability thereunder; and

the amount or amounts that it shall be proper for the Company to pay thereunder.

B. The Reinsurer shall be bound by the judgment of the Company as to the obligation(s) and

liability(ies) of the Company under any Policy.

D. Nothing in this Article shall be construed to override any of the other terms and conditions of this Contract.

ARTICLE 24

INSOLVENCY

(1) on the basis of the liability of the Company, or (2) on the basis of claims filed and allowed in the liquidation proceeding, whichever may be required by applicable statute, without diminution because of the insolvency of the Company or because the liquidator, receiver, conservator or statutory successor of the Company has failed to pay all or a portion of any claim. It is agreed, however, that the liquidator, receiver, conservator or statutory successor of the Company shall give written notice to the Reinsurer of the pendency of a claim against the Company indicating the Policy or bond reinsured, which claim would involve a possible liability on the part of the Reinsurer within a reasonable time after such claim is filed in the conservation or liquidation proceeding or in the receivership, and that during the pendency of such claim, the Reinsurer may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses that it may deem available to the Company or its liquidator, receiver, conservator or statutory successor. The expense thus incurred by the Reinsurer shall be chargeable, subject to the approval of the court, against the Company as part of the expense of conservation or liquidation to the extent of a pro rata share of the benefit that may accrue to the Company solely as a result of the defense undertaken by the Reinsurer.

ARTICLE 25

RUN-OFF REINSURER

A. “Run-off Reinsurer” means any Subscribing Reinsurer that:

has been ordered by a state insurance department or other legal authority to cease writing business, or has been placed under regulatory supervision or in rehabilitation; or

has ceased reinsurance underwriting operations; or

has transferred or delegated its claims-paying authority to an unaffiliated entity; or

engages in a process of Scheme of Arrangement or similar procedure related to this Contract, including but not limited to an insurance business transfer scheme pursuant to Part VII of the Financial Services and Markets Act 2000 (U.K.), as may be amended from time to time; or

in any other way has assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

Should the Run-off Reinsurer fail to pay amounts due hereunder, the interest penalty specified in the Late Payments Article shall be increased by 0.5% for each 30 days that a payment is past due, subject to a maximum increase of 7.0%.

The Run-off Reinsurer’s liability for losses for Policies covered by this Contract shall be commuted. In the event the Company and the Run-off Reinsurer cannot agree on the commutation amount of the Run-off Reinsurer’s liability under such Policies, they shall appoint an actuary and/or appraiser to assess such liability and shall share equally any expense of the actuary and/or appraiser. If the Company and the Run-off Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Run-off Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Run-off Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties under this Contract.

The Run-off Reinsurer shall have no right of access to the Records of the Company if the Run-off Reinsurer has denied payment of any claim hereunder or there is a pending arbitration between the Company and the Run-off Reinsurer regarding any claim hereunder. A reservation of rights shall be considered a denial of a claim. Notwithstanding the above, the Run-off Reinsurer shall continue to have access to Records of the Company for any claim for which it has raised a query within 30 days of its receipt of a billing, but any inspection of Records must be completed within 90 days of receipt of billing or access will be deemed waived.

4. The provisions of the Arbitration Article shall not apply.

C. The Company’s waiver of any rights provided in this Article is not a waiver of that right or other rights at a later date.

ARTICLE 26

ARBITRATION

Any dispute arising out of the interpretation, performance or breach of this Contract, including the formation or validity thereof, shall be submitted for decision to a panel of three arbitrators. Notice requesting arbitration shall be in writing and sent certified or registered mail, return receipt requested.

One arbitrator shall be chosen by each party and the two arbitrators shall then choose an impartial third arbitrator who shall preside at the hearing. If either party fails to appoint its arbitrator within 30 days after being requested to do so by the other party, the latter, after 10 days’ prior notice by certified or registered mail of its intention to do so, may appoint the second arbitrator.

If the two arbitrators do not agree on a third arbitrator within 60 days of their appointment, the third arbitrator shall be chosen in accordance with the procedures for selecting the third arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society – U.S. (ARIAS). The arbitrators shall be persons knowledgeable about insurance and reinsurance who have no personal or financial interest in the result of the arbitration. If a member of the panel dies, becomes disabled or is otherwise unwilling or unable to serve, a substitute shall be selected in the same manner as the departing member was chosen and the arbitration shall continue.

Within 30 days after all arbitrators have been appointed, the panel shall meet and determine timely periods for briefs, discovery procedures and schedules of hearings.

The panel shall be relieved of all judicial formality and shall not be bound by the strict rules of procedure and evidence. Notwithstanding anything to the contrary in this Contract, the arbitrators may at their discretion, consider underwriting and placement information provided by the Company to the Reinsurer, as well as any correspondence exchanged by the parties that is related to this Contract. The arbitration shall take place in Tampa, Florida, or at such other place as the parties shall agree. The decision of any two arbitrators shall be in writing and shall be final and binding. The panel is empowered to grant interim relief as it may deem appropriate.

The panel shall interpret this Contract as an honorable engagement rather than as merely a legal obligation and shall make its decision considering the custom and practice of the applicable insurance and reinsurance business as promptly as possible after the hearings. Judgment upon an award may be entered in any court having jurisdiction thereof.

Each party shall bear the expense of its own arbitrator and shall jointly and equally bear with the other party the cost of the third arbitrator. The remaining costs of the arbitration shall be allocated by the panel. The panel may, at its discretion, award such further costs and expenses as it considers appropriate, including but not limited to attorneys’ fees, to the extent permitted by law.

ARTICLE 27

EXPEDITED ARBITRATION

Notwithstanding the provisions of the Arbitration Article, in the event an amount in dispute hereunder $1,000,000 or less, the parties will submit to an expedited arbitration process with the use of a single arbitrator. The arbitrator will be chosen in accordance with the procedures for selecting an arbitrator in force on the date the arbitration is demanded, established by the AIDA Reinsurance and Insurance Arbitration Society - U.S. (ARIAS).

Each party’s case will be submitted to the arbitrator within 100 calendar days of the date of determination of the arbitrator. Discovery will be limited to exchanging only those documents directly relating to the issue in dispute, subject to a limit of two discovery depositions from each party, unless otherwise authorized by the arbitrator upon a showing of good cause.

Within 120 calendar days of the date of determination of the arbitrator, the hearing will be completed and a written award will be issued by the arbitrator. As the parties agree that time is of the essence, the sole arbitrator does not have the authority to lengthen the schedule, absent agreement of both parties. The arbitrator will have all the powers conferred on the arbitration panel as provided in the Arbitration Article, and said Article will apply to all matters not specifically addressed above.

ARTICLE 28

SERVICE OF SUIT

This Article applies only to those Subscribing Reinsurers not domiciled in the United States of America, and/or not authorized in any state, territory and/or district of the United States of America where authorization is required by insurance regulatory authorities.

This Article shall not be read to conflict with or override the obligations of the parties to arbitrate their disputes as provided for in the Arbitration Article. This Article is intended as an aid to compelling arbitration or enforcing such arbitration or arbitral award, not as an alternative to the Arbitration Article for resolving disputes arising out of this Contract.

D. Service of process in such suit may be made upon:

as respects Underwriting Members of Lloyd’s, London: Lloyd’s America, Inc., Attention: Legal Department, 280 Park Avenue, East Tower, 25th Floor, New York, New York 10017;

as respects any other Subscribing Reinsurer: Messrs. Mendes and Mount, 750 Seventh Avenue, New York, New York 10019-6829, or another party specifically designated in the Subscribing Reinsurer’s Interests and Liabilities Agreement attached hereto.

The above-named are authorized and directed to accept service of process on behalf of the Reinsurer in any such suit.

ARTICLE 29

GOVERNING LAW

ARTICLE 30

ENTIRE AGREEMENT

ARTICLE 31

NON-WAIVER

ARTICLE 32

SANCTION LIMITATION AND EXCLUSION CLAUSE

ARTICLE 33

INTERMEDIARY

ARTICLE 34

MODE OF EXECUTION

A. This Contract may be executed by:

an original written ink signature of paper documents;

an exchange of facsimile copies showing the original written ink signature of paper documents;

electronic signature technology employing computer software and a digital signature or digitizer pen pad to capture a person’s handwritten signature in such a manner that the signature is unique to the person signing, is under the sole control of the person signing, is capable of verification to authenticate the signature and is linked to the document signed in such a manner that if the data is changed, such signature is invalidated.

HOMEOWNERS CHOICE PROPERTY & CASUALTY
INSURANCE COMPANY, INC.

Signature:___________________________ Title: ___________________________

Print Name:___________________________

PANHANDLE NAMED STORM PROPERTY CATASTROPHE
EXCESS OF LOSS REINSURANCE CONTRACT

POOLS, ASSOCIATIONS & SYNDICATES EXCLUSIONS CLAUSE

Section A:

This Contract excludes:

All business derived directly or indirectly from any Pool, Association or Syndicate which maintains its own reinsurance facilities.

Any Pool or Scheme (whether voluntary or mandatory) formed after March 1, 1968 for the purpose of insuring property, whether on a country-wide basis or in respect of designated areas. This exclusion shall not apply to so-called Automobile Insurance Plans or other Pools formed to provide coverage for Automobile Physical Damage.

Section B:

This Contract excludes business written by the Company for the same perils, which is known at the time to be insured by, or in excess of underlying amounts placed in, any Pool, Association or Syndicate, whether by way of insurance or reinsurance, formed for the purpose of writing any of the following:

Oil, Gas or Petro-Chemical Plants
Oil or Gas Drilling Rigs and/or
Aviation Risks

The exclusion under paragraph 1 of this Section B does not apply:

Where the Total Insured Value over all interests of the risk in question is less than $250,000,000.

To interests traditionally underwritten as Inland Marine and/or Stock and/or Contents written on a Blanket basis.

To Contingent Business Interruption, except when the Company is aware that the key location is known at the time to be insured in any Pool, Association or Syndicate named above, other than as provided for under subparagraph (a).

Section C:

a. So-called “Beach and Windstorm Plans” and so-called “Coastal Pools”;

All “FAIR Plan” and “Rural Risk Plan” business;

Louisiana Citizens Property Insurance Corporation;

California Earthquake Authority (“CEA”) or any similar entity.

2. However, this reinsurance does not include any increase in such liability resulting from:

The inability of any other participant in such Residual Market Mechanisms to meet its liability;

Any claim against a Residual Market Mechanism or any participant therein, including the Company, whether by way of subrogation or otherwise, brought by or on behalf of any insolvency fund (as defined in the Exclusions Article);

Any assessment or surcharge levied on the policyholder and therefore not a liability of the Company;

The Company’s initial capital contribution to the CEA;

Any assessments, other than interim and regular assessments, from a Residual Market Mechanism included in subparagraph 1(c) above;

Any expenditure to purchase or retire bonds.

NOTES: Wherever used herein the terms:

“Contract” shall be understood to mean “Agreement,” “Contract,” “Policy” or whatever other term is used to designate the attached reinsurance document.

NUCLEAR INCIDENT EXCLUSION CLAUSE - PHYSICAL DAMAGE -
REINSURANCE - U.S.A.

1. This Reinsurance does not cover any loss or liability accruing to the Reassured, directly or

indirectly, and whether as Insurer or Reinsurer, from any Pool of Insurers or Reinsurers formed for the purpose of covering Atomic or Nuclear Energy risks.

Nuclear reactor power plants including all auxiliary property on the site, or

II.

Any other nuclear reactor installation, including laboratories handling radioactive materials in connection with reactor installations, and “critical facilities” as such, or

III.

Installations for fabricating complete fuel elements or for processing substantial quantities of “special nuclear material”, and for reprocessing, salvaging, chemically separating, storing or disposing of “spent” nuclear fuel or waste materials, or

IV.

Installations other than those listed in paragraph (2) III above using substantial quantities of radioactive isotopes or other products of nuclear fission.

(a)

where Reassured does not have knowledge of such nuclear reactor power plant or nuclear installation, or

(b)

where said insurance contains a provision excluding coverage for damage to property caused by or resulting from radioactive contamination, however caused. However on and after 1st January 1960 this sub-paragraph (b) shall only apply provided the said radioactive contamination exclusion provision has been approved by the Governmental Authority having jurisdiction thereof.

4. Without in any way restricting the operations of paragraphs (1), (2) and (3) hereof, this

Reinsurance does not cover any loss or liability by radioactive contamination accruing to the Reassured, directly or indirectly, and whether as Insurer or Reinsurer, when such radioactive contamination is a named hazard specifically insured against.

It is understood and agreed that this clause shall not extend to risks using radioactive isotopes in any form where the nuclear exposure is not considered by the Reassured to be the primary hazard.

The term “special nuclear material” shall have the meaning given it in the Atomic Energy Act of 1954 or by any law amendatory thereof.

Reassured to be sole judge of what constitutes:

(a)

substantial quantities, and

(b)

the extent of installation, plant or site.

Note: Without in any way restricting the operation of paragraph (1) hereof, it is understood and agreed that

(a)

all policies issued by the Reassured on or before 31st December 1957 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

(b)

with respect to any risk located in Canada policies issued by the Reassured on or before 31st December 1958 shall be free from the application of the other provisions of this Clause until expiry date or 31st December 1960 whichever first occurs whereupon all the provisions of this Clause shall apply.

12/12/57
NMA 1119

NOTES: Wherever used herein the terms:

“Agreement” shall be understood to mean “Agreement”, “Contract”, “Policy” or whatever other term is used to designate the attached reinsurance document.

“Reinsurers” shall be understood to mean “Reinsurers”, “Underwriters” or whatever other term is used in the attached reinsurance document to designate the reinsurer or reinsurers.

TERRORISM EXCLUSION

involves violence against one or more persons; or

involves damage to property; or

endangers life other than that of the person committing the action; or

creates a risk to health or safety of the public or a section of the public; or

is designed to interfere with or to disrupt an electronic system.

LIMITED COMMUNICABLE DISEASE EXCLUSION (PROPERTY TREATY
REINSURANCE)

Notwithstanding any provision to the contrary within this reinsurance agreement, this reinsurance agreement excludes any loss, damage, liability, claim, cost or expense of whatsoever nature, directly or indirectly caused by, contributed to by, resulting from, arising out of, or in connection with a Communicable Disease or the fear or threat (whether actual or perceived) of a Communicable Disease regardless of any other cause or event contributing concurrently or in any other sequence thereto.

Subject to the other terms, conditions and exclusions contained in this reinsurance agreement, this reinsurance agreement will cover physical damage to property insured under the original policies and any Time Element Loss directly resulting therefrom where such physical damage is directly caused by or arising from any of the following perils: fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, rainstorm, hail, tornado, cyclone, typhoon, hurricane, earthquake, seaquake, seismic and/or volcanic disturbance/eruption, tsunami, flood, freeze, ice storm, weight of snow or ice, avalanche, meteor/asteroid impact, landslip, landslide, mudslide, bush fire, forest fire, riot, riot attending a strike, civil commotion, vandalism and malicious mischief.

Definitions

Communicable Disease means any disease which can be transmitted by means of any substance or agent from any organism to another organism where:

3.1. the substance or agent includes, but is not limited to, a virus, bacterium, parasite or

Time Element Loss means business interruption, contingent business interruption or any other consequential losses.

LMA5503

15 May 2020

CYBER LOSS LIMITED EXCLUSION CLAUSE (PROPERTY TREATY REINSURANCE)

other organism or any variation thereof, whether deemed living or not, and Notwithstanding any provision to the contrary within this reinsurance agreement or any endorsement thereto, this reinsurance agreement excludes all loss, damage, liability, cost or expense of whatsoever nature directly or indirectly caused by, contributed to by, resulting from, arising out of or in connection with:

1.2. any loss of, alteration of, or damage to or a reduction in the functionality, availability or operation of a Computer System, unless subject to the provisions of paragraph 2;

1.3. any loss of use, reduction in functionality, repair, replacement, restoration or reproduction of any Data, including any amount pertaining to the value of such Data.

fire, lightning, explosion, aircraft or vehicle impact, falling objects, windstorm, hail, tornado, cyclone, hurricane, earthquake, volcano, tsunami, flood, freeze or weight of snow

Definitions

Time Element Loss means business interruption, contingent business interruption or any other consequential losses.

LMA5410

06 March 2020

TRUST AGREEMENT REQUIREMENTS CLAUSE

A. Except as provided in paragraph B of this Clause, if the Reinsurer satisfies its funding

obligations under the Unauthorized Reinsurance Article by providing a Trust Agreement, the Reinsurer shall ensure that the Trust Agreement:

Requires the Reinsurer to establish a trust account for the benefit of the Company, and specifies what the Trust Agreement is to cover;

Stipulates that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash (United States legal tender), and certificates of deposit (issued by a United States bank and payable in United States legal tender), or any combination of the two, provided that the investments are issued by an institution that is not the parent, subsidiary or affiliate of either the Reinsurer or the Company;

Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the Company, or the trustee upon the direction of the Company, may whenever necessary negotiate these assets without consent or signature from the Reinsurer or any other entity;

Requires that all settlements of account between the Company and the Reinsurer be made in cash or its equivalent; and

Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the Company or the Reinsurer.

Provides that assets deposited in the trust account shall be valued according to their current fair market value and shall consist only of cash in United States dollars, certificates of deposit issued by a United States financial institution as defined in California Insurance Code Section 922.7(a) and payable in United States dollars, and investments permitted by the California Insurance Code, or any combination of the above.

Provides that investments in or issued by an entity controlling, controlled by or under common control with either the grantor or the beneficiary of the trust shall not exceed 5% of total investments.

Requires the Reinsurer, prior to depositing assets with the trustee, to execute assignments or endorsements in blank, or to transfer legal title to the trustee of all shares, obligations or any other assets requiring assignments, in order that the ceding insurer, or the trustee upon the direction of the ceding insurer, may, whenever necessary, negotiate these assets without consent or signature from the Reinsurer or any other entity.

Provides that assets in the trust account shall be withdrawn only as permitted in this Contract, without diminution because of the insolvency of the ceding insurer or the Reinsurer.

EX-10.16 10 hci-ex10_16.htm EX-10.16 EX-10.16

EXHIBIT 10.16. Certain identified information has been excluded from this exhibit because it is immaterial and would be competitively harmful if publicly disclosed. Information that has been omitted is indicated with brackets.

EXHIBIT 10.16PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 1


PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS
Article		Page

	Preamble	4
1	Business Covered	4
2	Retention and Limit	4
3	Florida Hurricane Catastrophe Fund	5
4	Term	6
5	Special Termination	6
6	Territory	8
7	Exclusions	8
8	Special Acceptance	10
9	Premium	10
10	Reinstatement	11
11	Definitions	12
12	Extra Contractual Obligations/Excess of Policy Limits	15
13	Net Retained Liability	16
14	Original Conditions	16
15	No Third Party Rights	16
16	Notice of Loss and Loss Settlements	16
17	Late Payments	17
18	Offset	18
19	Currency	18
20	Unauthorized Reinsurance	19
21	Taxes	21
22	Access to Records	22
23	Confidentiality	23
24	Indemnification and Errors and Omissions	24
25	Insolvency	24
26	Run-Off Reinsurer	25
27	Arbitration	27
28	Expedited Arbitration	28
29	Service of Suit	28
30	Governing Law	29
31	Entire Agreement	30
32	Non-Waiver	30
33	Sanction Limitation and Exclusion Clause	30
34	Intermediary	30
35	Mode of Execution	31
	Company Signing Block	33

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 2




PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT TABLE OF CONTENTS
Attachments		Page

	Pools, Associations & Syndicates Exclusions Clause	34
	Nuclear Incident Exclusion Clause - Physical Damage - Reinsurance - U.S.A.	37
	Terrorism Exclusion	39
	Limited Communicable Disease Exclusion (Property Treaty Reinsurance)	40
	Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance)	41
	Trust Agreement Requirements Clause	42

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 3

PROPERTY CATASTROPHE EXCESS OF LOSS REINSURANCE CONTRACT

(the “Contract”)

issued to

HOMEOWNERS CHOICE PROPERTY & CASUALTY INSURANCE COMPANY, INC.

Tampa, Florida

including any and/or all companies that are or may hereafter become affiliated therewith

(collectively, the “Company”)

THE SUBSCRIBING REINSURER(S) IDENTIFIED IN THE
INTERESTS AND LIABILITIES AGREEMENT(S) ATTACHED TO
AND FORMING PART OF THIS CONTRACT

(the “Reinsurer”)

ARTICLE 1

BUSINESS COVERED

This Contract is to indemnify the Company in respect of its net excess liability as a result of any

ARTICLE 2

RETENTION AND LIMIT

A. For each Layer of reinsurance provided hereunder, the Reinsurer shall be liable in respect of each Loss Occurrence for the Ultimate Net Loss over and above the initial Ultimate Net Loss retention as set forth in the schedule below for the Loss Occurrence, subject to a limit of liability to the Reinsurer for each such Loss Occurrence, and subject further to a limit of liability for all Loss Occurrences commencing during the term of this Contract, as set forth below:

Effective: June 1, 2024 DOC: June 14, 2024

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RETENTION AND LIMIT SCHEDULE
Layer	Company’s Retention	Reinsurer’s Limit of Liability
	Ultimate Net Loss in respect of each Loss Occurrence	Ultimate Net Loss in respect of each Loss Occurrence	Ultimate Net Loss in respect of all Loss Occurrences during the term of this Contract
Fourth Layer	[ ]	[ ]	[ ]
Fifth Layer	[ ]	[ ]	[ ]
Sixth Layer	[ ]	[ ]	[ ]

ARTICLE 3

FLORIDA HURRICANE CATASTROPHE FUND

Effective: June 1, 2024 DOC: June 14, 2024

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Upon determination of the Company’s retention and limit under the FHCF, losses will be adjusted, recognizing any adjustment to the “Projected Payout Multiple” caused by a change in the Aggregate Mandatory FHCF Premium or any other adjustments as required by statute to determine the final FHCF, but disregarding any change due to a decrease in the statutory limit.

B. Any FHCF reimbursement premiums paid by the Company for FHCF layers that inure to the benefit of this Contract shall be deemed to be premiums paid for inuring reinsurance.

C. The Company has opted for 90% coverage selections from the FHCF.

ARTICLE 4

TERM

ARTICLE 5

SPECIAL TERMINATION

1. The Subscribing Reinsurer ceases underwriting operations.

2. A state insurance department or other legal authority orders the Subscribing Reinsurer to cease writing business, or the Subscribing Reinsurer is placed under regulatory supervision.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 6

the amount thereof at any date during the prior 12-month period (including the period prior to the inception of this Contract).

9. The Subscribing Reinsurer has in any other way assigned its interests or delegated its obligations under this Contract to an unaffiliated entity.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 7

appraiser to assess such amount and shall share equally any expense of the actuary and/or appraiser. If the Company and the Subscribing Reinsurer cannot agree on an actuary and/or appraiser, the Company and the Subscribing Reinsurer each shall nominate three individuals, of whom the other shall decline two, and the final appointment shall be made by drawing lots. Payment by the Subscribing Reinsurer of the amount of liability ascertained shall constitute a complete and final release of both parties in respect of liability arising from the Subscribing Reinsurer’s participation under this Contract.

D. The Company’s option to require commutation under paragraph C above shall survive the termination or expiration of this Contract.

ARTICLE 6

TERRITORY

This Contract shall apply to Policies issued in the State of Florida.

ARTICLE 7

EXCLUSIONS

A. This Contract shall not apply to and specifically excludes:

1. Flood when written as such.

2. Earthquake for standalone Policies where earthquake is the only named peril.

3. Hail damage to an insured’s growing or standing crops.

5. Pools, Associations & Syndicates, per the attached exclusion.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 8

insolvent, or that is otherwise deemed unable to meet any claim, debt, charge, fee or other obligation in whole or in part.

8. Losses excluded by the attached Nuclear Incident Exclusion Clause – Physical Damage – Reinsurance – U.S.A.

9. Terrorism as defined in the attached Terrorism Exclusion.

10. Mold unless directly resulting from an otherwise covered peril.

12. Financial guarantee and insolvency.

14. Losses excluded by the attached Communicable Disease Exclusion (Property Treaty Reinsurance).

15. Loss Excluded by the attached Cyber Loss Limited Exclusion Clause (Property Treaty Reinsurance).

16. Policies written by TypTap Insurance Company.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 9

ARTICLE 8

SPECIAL ACCEPTANCE

ARTICLE 9

PREMIUM

The Company shall pay the Reinsurer a Deposit Premium in accordance with the schedule set forth below. The reinsurance premium to be paid to the Reinsurer for the reinsurance provided under each Layer shall be calculated at the Final Adjusted Premium Rates set out below multiplied by the Company’s final Total Insured Value, subject to the applicable Minimum Premium stated below:


PREMIUM SCHEDULE
Layer	Final Adjusted Premium Rate	Deposit Premium	Minimum Premium
Fourth Layer	[ ]	[ ]	[ ]
Fifth Layer	[ ]	[ ]	[ ]
Sixth Layer	[ ]	[ ]	[ ]

B. The Deposit Premiums set forth in paragraph A above shall be payable to the Reinsurer by the Company in installments as follows:


DEPOSIT INSTALLMENT SCHEDULE
Layer	June 1, 2024	September 1, 2024	January 1, 2025	April 1, 2025
Fourth Layer	[ ]	[ ]	[ ]	[ ]
Fifth Layer	[ ]	[ ]	[ ]	[ ]

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U8GR0001 10


Sixth Layer	[ ]	[ ]	[ ]	[ ]

C. Within 45 days following the expiration of this Contract, the Company shall provide the Reinsurer with a report showing the Company’s final Total Insured Value. This final Total Insured Value shall be multiplied by the Final Adjusted Premium Rate for each Layer as stated in paragraph A above. Should this amount be greater than or equal to [ ] and less than or equal to [ ] of the Deposit Premium as set forth above, there shall be no additional or return premium due. Should the amount so calculated exceed [ ] of the Deposit Premium paid in accordance with paragraph A above, the Company shall immediately pay the Reinsurer the difference in excess of [ ] of the Deposit Premium. Should the amount so calculated be less than [ ] of the Deposit Premium paid in accordance with paragraph A of this Article, the Reinsurer shall immediately pay the Company the difference below [ ] of the Deposit Premium, subject to the Minimum Premium as set forth above.

D. “Total Insured Value” means the Company’s aggregate wind exposures on September 30, 2024 for business covered hereunder.

E. The estimated Total Insured Value is $44,075,532,874.

F. The Company shall furnish the Reinsurer with such reasonably available information as may be reasonably required by the Reinsurer for completion of the Reinsurer’s financial statements.

ARTICLE 10

REINSTATEMENT

A. Loss payments under any Layer of this Contract shall reduce the limit of coverage afforded by the amounts paid, but the limit of coverage shall be reinstated from the time of the occurrence of the loss, and for each amount so reinstated, the Company agrees to pay, simultaneously with the Reinsurer’s loss payment, an additional premium calculated at pro rata of the Reinsurer’s premium for the applicable layer(s) for the term of this Contract, being pro rata only as to the fraction of the Reinsurer’s limit of liability hereunder (i.e., the fraction of the Reinsurer’s limit of liability for each Loss Occurrence as set forth for the Layer in the Retention and Limit Article) so reinstated. Nevertheless, the Reinsurer’s liability under the applicable layer(s) shall not exceed such limit(s) in respect of any one Loss Occurrence, nor the applicable limit(s) in respect of all Loss Occurrences commencing during the term of this Contract, as set forth in the Retention and Limit Article.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 11

ARTICLE 11

DEFINITIONS

5. Nothing in this clause shall be construed to mean that losses are not recoverable hereunder until the Company’s “Ultimate Net Loss” has been ascertained.

1. court costs;

2. costs of supersedeas and appeal bonds;

3. monitoring counsel expenses;

4. legal expenses and costs incurred in connection with coverage questions and legal actions connected thereto, including but not limited to declaratory judgment actions;

5. post-judgment interest;

6. pre-judgment interest, unless included as part of an award or judgment;

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 12

8. subrogation, salvage and recovery expenses.

“Loss Adjustment Expense” does not include salaries and expenses of the Company’s employees, except as provided in subparagraph (7) above, and office and other overhead expenses.

a. As regards any “Named Storm,” all individual losses sustained by the Company arising out of and directly occasioned by such “Named Storm,” without regard to the limitations of duration and extent set forth above. “Named Storm” means any storm or storm system declared by the US National Hurricane Center, US Central Pacific Hurricane Center, US Weather Prediction Center, or their successor organizations, all being divisions of the US National Weather Service to be a tropical storm or hurricane, and any successors thereof. A storm or storm system that merges with a “Named Storm” shall be considered part of that “Named Storm,” once it has merged. A “Named Storm” shall be deemed to begin at the effective time and date of the first watch, warning or other official advisory applicable to such tropical storm or hurricane issued by the above referenced governmental meteorological agencies. A “Named Storm” shall be deemed to end 72 hours after the cancellation of the last watch, warning or other official advisory applicable to such tropical storm, hurricane or successor, issued by the above referenced governmental meteorological agencies irrespective of the duration of the timing or spacing between such watches, warnings or other official advisories. If two or more storms are assigned different names by the above referenced governmental meteorological agencies, each of those storms shall constitute a separate event for purposes of this definition.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 13

2. Except as provided in subparagraph (1)(a) above:

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 14

Losses arising from a combination of two or more perils as a result of the same event shall be considered as having arisen from one “Loss Occurrence.” Furthermore, all losses arising from an event involving a combination of losses described in subparagraphs (1)(a) and (1)(b) may be considered as having arisen from one “Loss Occurrence.” Notwithstanding the foregoing, the hourly limitations as stated above shall not be exceeded as respects the applicable perils, and, except as respects those “Loss Occurrences” involving a “Named Storm” referred to in subparagraph (1)(a) above, no single “Loss Occurrence” shall encompass a time period greater than 168 consecutive hours.

D. “Policy” means any binder, policy, or contract of insurance or reinsurance issued, accepted or held covered provisionally or otherwise, by or on behalf of the Company.

ARTICLE 12

EXTRA CONTRACTUAL OBLIGATIONS/EXCESS OF POLICY LIMITS

E. Loss Adjustment Expense in respect of Extra Contractual Obligations and/or Loss in Excess of Policy Limits shall be covered hereunder in the same manner as other Loss Adjustment Expense.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 15

G. In no event shall coverage be provided to the extent not permitted under law.

ARTICLE 13

NET RETAINED LIABILITY

A. This Contract applies only to that portion of any loss that the Company retains net for its own account (prior to deduction of any reinsurance that inures solely to the benefit of the Company).

ARTICLE 14

ORIGINAL CONDITIONS

ARTICLE 15

NO THIRD PARTY RIGHTS

ARTICLE 16

NOTICE OF LOSS AND LOSS SETTLEMENTS

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 16

the Reinsurer, at least monthly, of all subsequent developments thereto that may materially affect the position of the Reinsurer.

B. The Company alone and at its full discretion shall adjust, settle or compromise all claims and losses.

ARTICLE 17

LATE PAYMENTS

1. The number of full days that have expired since the overdue date or the last monthly calculation, whichever the lesser; times

2. 1/365th of the sum of the six-month United States Treasury Bill rate as quoted in The Wall Street Journal on the first business day of the month for which the calculation is made, plus 1%; times

3. The amount past due, including accrued interest.

Interest shall accumulate until payment of the original amount due plus interest penalties have been received by the Intermediary.

B. The due date shall, for purposes of this Article, be determined as follows:

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 17

ARTICLE 18

OFFSET

ARTICLE 19

CURRENCY

A. Where the word “Dollars” and/or the sign “$” appear in this Contract, they shall mean United States Dollars, and all payments hereunder shall be in United States Dollars.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 18

ARTICLE 20

UNAUTHORIZED REINSURANCE

A. This Article applies:

1. only to the extent a Subscribing Reinsurer does not qualify for credit with any insurance regulatory authority having jurisdiction over the Company’s reserves, or

1. unearned premium (if applicable);

2. known outstanding losses that have been reported to the Reinsurer and Loss Adjustment Expense relating thereto;

3. losses and Loss Adjustment Expense paid by the Company but not recovered from the Reinsurer;

4. losses incurred but not reported and Loss Adjustment Expense relating thereto;

5. all other amounts for which the Company cannot take credit on its financial statements unless funding is provided by the Reinsurer.

D. When funding by Trust Agreement, the Reinsurer shall ensure that the Trust Agreement complies with the provisions of the “Trust Agreement Requirements Clause” attached hereto.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 19

When funding by a LOC, the Reinsurer agrees to apply for and secure timely delivery to the Company of a clean, irrevocable and unconditional LOC issued by a bank and containing provisions acceptable to the insurance regulatory authorities having jurisdiction over the Company’s reserves in an amount equal to the Reinsurer’s Obligations. Such LOC shall be issued for a period of not less than one year, and shall be automatically extended for one year from its date of expiration or any future expiration date unless 30 days (or such other time period as may be required by insurance regulatory authorities), prior to any expiration date the issuing bank shall notify the Company by certified or registered mail that the issuing bank elects not to consider the LOC extended for any additional period.

1. to reimburse the Company for the Reinsurer’s Obligations, the payment of which is due under the terms of this Contract and that has not been otherwise paid;

4. to pay the Reinsurer’s share of any other amounts the Company claims are due under this Contract.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 20

ARTICLE 21

TAXES

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U8GR0001 21

ARTICLE 22

ACCESS TO RECORDS

C. For purposes of this Article:

1. “Privileged Documents” means any documents that are Attorney-Client Privilege Documents and/or Work Product Privilege Documents.

Effective: June 1, 2024 DOC: June 14, 2024

U8GR0001 22