Spinnaker remaining disciplined amid strong pipeline of program opportunities

(The Insurer) - Spinnaker Insurance Company continues to see a host of program opportunities, but the CEO of parent company Hippo Rick McCathron said the fronting carrier remains “incredibly disciplined” about only entering partnerships that provide long-term profitability.

During Hippo’s fourth-quarter and full-year earnings call on March 6, McCathron said Spinnaker was presented with more than 100 program opportunities last year.

“There is no shortage of potential programs for Spinnaker to work with,” McCathron told analysts.

“We reviewed more than 100 opportunities in 2024, but we do not think we need to compromise on quality to achieve compelling financial results,” McCathron stated.

Talking to Program Manager, McCathron said Spinnaker’s strong brand means it has an opportunity to look at most programs that are coming to market looking for new fronting arrangements.

Those opportunities could be entirely new programs entering the market for the first time, existing offerings looking for a replacement partner, or products that are growing and are in need of multiple fronting relationships.

“We look at most of them, but we are incredibly disciplined to only partner with high-quality programs that we believe will have a strong likelihood of positive underwriting results,” McCathron stated.

The fronting carrier has had a strong start to 2025, with Spinnaker’s pipeline for fronting business “very full”.

Indeed, the Hippo subsidiary has been receiving new submissions across a broad range of business lines.

While there are plenty of program opportunities in the market, McCathron noted that the number of high-quality potential partnerships that Spinnaker is actually interested in remains limited.

“We're not going to do everything,” he said.

“There's a lot of things that just are not in our strike zone. But where things are in our strike zone – property and liability, generally shorter tail, financial services protections, wheels business that has a proven track record – we are interested in those programs,” McCathron said.

“We very much try to have a balanced portfolio from a product line perspective,” the executive added.

Because Spinnaker is focused on only supporting what it deems to be high-quality programs, McCathron said it is comfortable assuming a portion of the risk written.

By taking a position on the program, McCathron said Spinnaker helps the underwriting entity by taking risk on their reinsurance program, but it can also boost the fronting carrier’s own profitability.

Generally, Spinnaker will assume 0% to 20% of the risk underwritten by a program. The usual range is 10% to 20%, however, and very occasionally it will take an even greater position above that 20%.

McCathron described Spinnaker, which Hippo acquired almost four years ago to serve as a risk-bearing entity for the homeowners insurance-focused MGA, as a “quality asset”.

BENEFICIAL HIPPO OWNERSHIP

And McCathron said Spinnaker is in a position to make better underwriting decisions because it is owned by Hippo.

“There are more fronting carriers in the market,” he said.

“And I am fearful that some of these fronting carriers, because (fronting) is their core business, are taking more risk than they’re comfortable with. They’re taking on programs that maybe they wouldn’t if it was not their core business.”

McCathron said that is not the case for Spinnaker because it is part of the broader Hippo group.

“We will not sacrifice Spinnaker’s balance sheet for programs of lesser quality,” he stated.

During the earnings call, McCathron said Hippo’s insurance as a service business segment, which comprises Spinnaker, has “demonstrated the ability to achieve consistent long-term growth and profitability over the years while maintaining our quality bar for program vetting and underwriting”.

McCathron said Spinnaker’s annual revenue increased by 40% in 2024, while discipline in both program selection and risk participation meant the carrier ended last year with a net loss ratio of 39%.

“The performance of our programs generally have been very strong, and we're excited that we have an opportunity to grow with those partners and add new partners,” McCathron added.