Insurtech Porch invests US$57m in carrier HOA
Seattle-based insurtech Porch – a SaaS company reinventing the home services and insurance space – has invested US$57m in its insurance carrier subsidiary Homeowners of America Insurance (HOA).
The investment in the insurance carrier comes in exchange for both a US$49m surplus note from HOA and the acquisition of HOA’s rights to potential claims stemming from fraud connected to Vesttoo among other companies.
Furthermore, Porch has been appointed to the statutory committee of unsecured creditors in the bankruptcy (Chapter 11) of Vesttoo and intends to pursue recovery of funds.
Porch: Tighter security amid fraud exposure
As of September 2023, HOA has been under supervision by the Texas Department of Insurance (TDI) following the release of HOA’s statutory accounts for Q2 2023.
Resultingly, rating agency Demotech withdrew its financial stability rating for HOA, and Porch has worked closely to restore surplus to appropriate levels – the primary cause for its US$57m cash injection.
As of June 30, 2023, Porch held US$358m of unrestricted cash and investments – US$192m at HOA.
Porch says that following the fraud scandal at HOA, the insurance carrier remains focused on managing gross written premiums and underwriting actions, including price increases and non-renewal of higher-risk policies.
Porch CEO Matt Ehrlichman says: “This transaction is a credit to the team who worked tirelessly with TDI and others to find a structure that supports HOA and is a good outcome for Porch and our stakeholders now and into the future.
“We continue to focus on strong and consistent execution of things we can control and are pleased with the progress being made across Porch and what is ahead.”
The necessary actions of Porch highlight the growing dangers of fraud in the insurance space and its potential impact on businesses.
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