Reinsurance plays an important role in the financial strength and claims-paying ability of the PURE Group. We enter into these reinsurance contracts (known as treaties) in order to reduce the volatility of our results and support prudent growth. Reinsurance treaties provide several types of protection, including:
Per-Risk Pro-Rata. Also known as quota share, these are treaties in which reinsurers share in the premiums and losses for each covered risk. While pro-rata treaties are often subject to loss limitations (single large risks and/or catastrophic events), they provide the most comprehensive protection of any reinsurance program and fill gaps around Excess of Loss (XOL) programs. PURE places several pro-rata treaties across our Homeowners, Personal Excess Liability, Collections and Watercraft programs.
Per-Risk XOL. For our largest property exposures, PURE purchases reinsurance to limit the potential impact of any one large loss. Under these treaties, reinsurers not only respond if there is a loss under a covered policy that is in excess of a predetermined limit, but also provide important volatility protection against high-severity loss perils (typically large fires). PURE purchases per-risk XOL on our highest valued homes and watercraft, as well as collections of fine art, jewelry and automobiles.
Catastrophe XOL. PURE purchases significant reinsurance “towers” that protect against losses to multiple risks at one time due to natural catastrophes. We spend a lot of time and analytical effort to evaluate our potential exposure to a variety of natural catastrophes across our geographic footprint. Based on that information, we purchase catastrophe reinsurance to protect the PURE Group against massive catastrophic events (including those events that have much less than a 1-in-100 year modeled probability of occurring) with appropriate “reinstatement” provisions that will provide cover even if such an unthinkable event were to happen multiple times in the same year.
The PURE Group partners with over 60 highly rated and well-respected reinsurers across all treaties. This diversification helps to mitigate any third-party credit risk and ensures the financial strength and soundness of our reinsurance program.
These companies believe in PURE and are willing to put their capital at risk to support our growth. In the spirit of alignment, we need to ensure that we deliver an appropriate profit to these important capital providers to foster long-term support.