CORE, a Florida-domiciled reciprocal insurance exchange, is owned by its policyholders, referred to as subscribers, who gain ownership by buying an insurance policy and making a surplus contribution. Each subscriber has certain interests in CORE which include the right to appoint an attorney-in-fact (“AIF”), to vote for CORE’s advisory committee and to receive dividends or premium credits if CORE generates a surplus. At least two-thirds of the membership of CORE’s advisory committee must be subscribers who are independent of the AIF. CORE’s advisory committee is charged with overseeing the financial affairs of CORE.

At inception, CORE had no subscribers nor sufficient surplus to fund its insurance operations without additional financial support. HCI provided CORE with $25,000 in exchange for a 9% subordinated surplus note. As a result, CORE is considered a variable interest entity (“VIE”). In addition, CORE entered into an AIF agreement with CRM, a wholly owned subsidiary of HCI. The AIF agreement, which was approved by the FLOIR, can be terminated at any time by mutual agreement of both parties or with cause, if the FLOIR or a court of competent jurisdiction determines that a material breach of the agreement has occurred. Under the AIF agreement, CRM, with the power of attorney given by the subscribers, will directly or indirectly conduct the daily operations of CORE by underwriting insurance policies, collecting premiums, investing funds, and processing claims. As such, subscribers do not possess the power to directly manage CORE’s operations. The AIF agreement also permits CRM to contract with service providers including other HCI subsidiaries to perform certain functions. The activities which most significantly impact CORE's anticipated economic performance are its underwriting and investment results. The management and service agreements, together with HCI’s subordinated surplus note in CORE, exposes HCI to more than an insignificant amount of CORE’s expected economic performance. As such, HCI has variable interests in CORE.

Since HCI has the power to direct the activities of CORE that most significantly affect CORE’s economic performance and the obligation to absorb losses or the right to receive benefits from CORE that could potentially be significant to CORE via the subordinated surplus note and the management and service agreements, HCI is considered the primary beneficiary of CORE, a VIE, and is required to consolidate CORE. Since HCI has no equity at risk, CORE’s equity and results of operations are included in noncontrolling interests. In the event of dissolution, subscribers will participate in the distribution of any remaining equity without being liable for any shortfall in CORE's equity. Prior to distributing residual equity to subscribers, CORE's remaining assets, after fulfilling all other outstanding obligations, will be allocated to settle the holders of CORE's subordinated debts such as HCI’s 9% subordinated surplus note, comprising unpaid principal and accrued interest.

At December 31, 2023, the Company’s maximum exposure to loss relating to CORE was $25,000. CORE’s assets are legally restricted for the purpose of fulfilling obligations specific to CORE. The creditors of CORE have no legal right to pursue additional sources of payment from the Company. The following table summarizes the assets related to CORE which are included in the accompanying consolidated balance sheets:


	December 31,
	2023		2022
Assets:
Cash and cash equivalent	$	24,635	$	—
Restricted cash		300		—
Other assets		65		—