Report to Members: 2023 Letter from the CEO

To my fellow PURE members,

It is my honor to be addressing you as the new Chief Executive Officer of PURE. I had the good fortune to join PURE as the Chief Underwriting Officer in May of 2022 and prior to that, worked closely with PURE as a reinsurance partner with Berkshire Hathaway. In one way or another—as a reinsurer, a member and then an employee—I have been admiring and supporting your insurance company and its performance for many years before taking on my most exciting PURE role yet.

Eighteen years ago, Ross Buchmueller, Jeff Paraschac and Martin Hartley had the idea to approach the high net worth insurance market differently. And this idea has grown, under Ross’s expert guidance and leadership, into your insurance company—designed, built and managed for the benefit of its members.

I am deeply grateful to Ross for his friendship and want to thank him for his leadership, time and dedication to building PURE. By bringing together the most responsible owners of the finest-built homes to create a reciprocal exchange, my colleagues built your insurance company, where our goal is to reward members with award-winning service, broad coverage and competitive premiums that reflect the cost of risk.

As I reflect on our history and begin to chart the course for the coming years, I have spent a good amount of time considering both where we have succeeded and where we have not yet lived up to our full potential.

While it is a much easier job to write about the areas where I think we are outperforming, we, of course, have opportunity for improvement and there are clear areas where we are not performing at the level we desire.

Our underwriting results improved in 2023, but not to the level we need and want. PURE finished the year with a net combined ratio over 100%. Said another way, we paid out more in claims and expenses, including reinsurance costs, than we collected in premium dollars. For that reason, we will not be contributing to Subscriber Savings Accounts (SSAs). It’s important to keep in mind that PURE’s intention is to allocate excess underwriting profits back to our members through SSAs. SSAs are one of the many things that differentiate us from our public company peers who ultimately operate for the benefit of shareholders, not policyholders. We have allocated over $100 million to SSAs to date and hope to resume allocations in the years ahead.

Recent results have necessitated multiple actions to improve our position, including rate increases, non-renewals and expense reduction. The good news is that we are seeing signs of improvement.

Inflation, extreme weather, an uptick in severe but preventable claims and other headwinds are putting pressure on insurers, PURE included. We touch on inflation and preventable claims later throughout our Report to Members, so I will skip those here and focus on a few challenges impacting our business.

Extreme weather
Each year we highlight issues with extreme weather and the destruction it brings. In what seems to be a consistently worsening trend, 2023 stood out with insured catastrophe losses costing insurance companies approximately $80 billion, 40% above the 21st century average. $60 billion of those losses were caused by severe convective storms (SCS)—think straight-line winds, tornadoes, lightning and hail.

2023 also brought the deadliest wildfire to Hawaii in more than a century, with over one hundred fatalities and roughly 2,285 structures destroyed in Lahaina. We are thankful that all PURE members were safe, but several lost their homes in this fire. While we can’t undo the trauma they endured, we are proud to have done our part in providing support to those members in their time of need.

Automobile claim costs
It has been a challenging few years dealing with automobile industry trends, some of which will be temporary but many of which are likely permanent. Starting with rising repair costs, which have increased by 36% since 2019— and the average number of days to repair a vehicle is up by 35% over the same period. This can partially be explained by inflationary pressures, more expensive vehicle technology and supply chain disruption, but more frequent and severe accidents are also contributing factors as distracted driving becomes a greater societal issue.

Uninsured motorists and underinsured motorists
Industry-wide Automobile premium increases combined with broad economic strain have resulted in an increase in the number of drivers lapsing on their Auto insurance or renewing at state minimum limits. It is estimated that 1 in 7 drivers countrywide is uninsured. As a result, more and more carriers, even some high net worth carriers, are opting to exclude, or have filed to be able to exclude, Uninsured and Underinsured Motorists (UM/UIM) coverage from their Excess Liability policies. However, for most of our highly successful membership, this coverage is only growing in importance. Rest assured that PURE remains committed to offering this valuable coverage at fair rates. Today, 80% of our members elect to buy this coverage through their Excess Liability policy but this number should be closer to 100%. If you have not already done so, speak to your broker to ensure you’re adequately protected.

As I look ahead to 2024 and beyond, we will focus on continuing to improve the value we deliver to our members, while ensuring the sustainability of our reciprocals.