Reinsurance for the Reciprocal

6 Months Ended

Jun. 30, 2025

Note 12. Reinsurance for the Reciprocal

2025 Program

As of April 1, 2025, coverage for excess of loss catastrophe reinsurance starts at $25.0 million per occurrence up to a loss of $410.0 million. Additionally, the third party quota share reinsurance contracts start immediately at 7.5% of P&C losses, which includes catastrophe events, bringing the effective retention for the Reciprocal from $25.0 million per occurrence to $23.1 million per occurrence. We also place reinstatement premium protection to cover any reinstatement premiums due on the second through fourth layers.

Additionally, our captive reinsurance entity provides a non-catastrophic weather quota share in order to create more capital efficiency at the Reciprocal. This contract was approved for an initial period of 10 years but can be cancelled by Porch or the Reciprocal each year.

2024 Program

From April 1, 2024, to March 31, 2025, our third-party quota share program consisted of one combined program covering all business in all states and was placed at 27.5% of P&C losses. All programs were effective for the period April 1, 2024, through March 31, 2025, and were subject to certain limits and exclusions, which vary by participating reinsurer.

Coverage for catastrophe events started immediately within the quota share contracts and at $45.0 million per occurrence within the property catastrophe excess of loss treaties placed on April 1, 2024. Losses were shared at various levels up to $75.0 million. Over $75.0 million losses were covered up to a loss of $465.0 million. We also placed reinstatement premium protection to cover any reinstatement premiums due on the first five layers.

We placed a parametric reinsurance contract to cover aggregate severe convective storm losses from January 1, 2024, to January 1, 2025. This contract would provide up to $30.0 million in recovery over $85.0 million in modeled losses.

Reinsurance Impact

The effects of reinsurance on premiums written by the Reciprocal and earned for the three and six months ended June 30, 2025 and 2024, were as follows:


	Three Months Ended June 30,
	2025				2024
	Written		Earned		Written		Earned
Direct premiums	$	95,779	$	100,184	$	109,716	$	102,345
Ceded premiums	20,378		(21,229)		(59,857)		(40,518)
Net premiums	$	116,157	$	78,955	$	49,859	$	61,827


	Six Months Ended June 30,
	2025				2024
	Written		Earned		Written		Earned
Direct premiums	$	171,275	$	202,564	$	184,820	$	210,933
Ceded premiums	$	(11,263)	$	(60,295)	(90,186)		(76,881)
Net premiums	$	160,012	$	142,269	$	94,634	$	134,052

The Reciprocal’s 2025 third-party quota share program was placed at a reduced ceding percentage as compared to the 2024 program, which resulted in a portfolio transfer and lower ceded written premiums in the six months ended June 30, 2025.

The effects of reinsurance on incurred losses and loss adjustment expense (“LAE”) for the three and six months ended June 30, 2025 and 2024, were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Direct losses and LAE	$	39,664	$	110,210	$	84,356	$	189,626
Ceded losses and LAE	(7,072)		(26,060)		(22,629)		(36,543)
Net losses and LAE	$	32,592	$	84,150	$	61,727	$	153,083

The detail of reinsurance balances due is as follows:


	June 30, 2025		December 31, 2024
Ceded unearned premium	$	16,112	$	64,571
Losses and LAE reserve	17,881		19,793
Reinsurance recoverable	9,595		7,111
Other	1,955		828
Reinsurance balance due	$	45,543	$	92,303

On January 19, 2024, we entered into a five-year business collaboration agreement with Aon Corp. and Aon Re, Inc. ("Aon"), resulting in payments to us of approximately $25 million in January 2024 and additional cash payments through the end of the contract term. Of the cash payments that we have or will receive through the end of the contract term, $8.7 million is non-refundable and was immediately recognized in other income, net, in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). A portion of the remaining amount is potentially refundable to Aon if we breach the agreement, including if we directly or indirectly place reinsurance with brokers unaffiliated with Aon, subject to customary cure rights. The remaining amount is being recognized in other income, net, over the term of the agreement.