BestWire Services - 01/17/11
By Diana Rosenberg
Florida-based Privilege Underwriters Reciprocal Exchange, which is licensed in 32 states, is now active in 15 of them and plans to continue its diversification this year.
So far this year, PURE has launched in Arizona and Illinois, said President and Chief Executive Officer Ross Buchmueller. He said diversification is crucial for the company's long-term financial strength.
"We're identifying those places where we think we'll create an optimal result," Buchmueller said, and he cited writing in Massachusetts (BestWire, Aug. 17, 2010) as helping to create a better balance to PURE's book of business. "If we think that the prices aren't adequate, or that there's a lot of correlation to places that we're already in, we won't be pursuing straight across the board, equal-weight diversification."
Speaking at the recent Property/Casualty Joint Industry Forum, Buchmueller said he is seeing signs of economic improvement. "We see little signs like cash flow is better, people paying their bills faster, delinquencies are fewer, which is a sign of the recovery," he said.
Buchmueller noted that coastal property rates in Florida are rising. "Some of that's market driven, some of that's the regulatory environment has been more favorable to rate increases. So you have a pricing hardening
more than availability," Buchmueller said. "The new models, as they work their way through, will look at risk, coastal and inland, because I think the impact of the new models are likely to say that there is exposure well beyond the coast for mega events and that will likely lead to some hardening" in the market.
Chartis President and Chief Executive Office Kristian P. Moor, who spoke at the conference with Buchmueller, concurred that the new model from Risk Management Solutions Inc. "will be a telling tale."
"Will people close their eyes and pretend it didn't happen and reduce rates or keep rates where they are -- or open their eyes and look at it and take it serious and increase rates," Moor said. "Who's going to step up to the plate and do that or not do that, because it is a dramatic change on how people looked at the business in the past."
Domiciled in Fort Lauderdale, Fla., PURE provides homeowners, automobile, jewelry, art, personal liability and watercraft products for high net worth individuals. The average insured home rebuilding cost of its members is $1.7 million. In PURE's business model, policyholders agree to exchange contracts of insurance to achieve the desired risk pooling. Members' contributions pay for each others' claims. Policyholders' contributions to surplus are made during the first five years of membership in addition to premiums. The underwriting criteria provide that the homes must be worth at least $1 million and be well-protected
against weather-related events (BestWire, March 2, 2010).
Currently Florida residents make up about one-third of PURE's membership, and Buchmueller expects that figure to drop to 20 to 25% this year. Membership stands around 10,000.
"Our sense is that we can get to 30,000 or 35,000 members in the next couple years," Buchmueller told the conference.
"The consumer is far smarter or certainly more active in seeking smarter solutions, and I say that's more favorable from the standpoint of a new provider," Buchmueller said, quipping to Moor and other executives on
the panel, "We're doing great, but we're not worried about 'too big to fail' yet."
The PURE Group of Insurance Cos. currently has a Best's Financial Strength Rating of A- (Excellent).
To see an interview with Buchmueller, visit