Hippo-Spinnaker deal brings paper guarantee

Rumours that Hippo and Spinnaker were in talks over a potential transaction had been circulating in the program fronting space for a number of months.

The Insurer revealed back in November 2019 that Spinnaker had been looking for an investment partner to fuel further growth. At that time, it was on course for gross written premium of around $150mn-$160mn for 2019.

Hippo and Spinnaker have been working together since 2017. The MGA has offered products on Spinnaker paper with reinsurance capacity behind it to customers in more than 18 states.

And Hippo’s move to take its relationship with Spinnaker in-house by acquiring the fronting carrier means that the insurtech is effectively guaranteeing access to the fronting specialist’s paper.

The deal will not transform Spinnaker into a captive vehicle, however, and nor will the platform be the only carrier the MGA writes on behalf of.

Hippo will continue to operate as an MGA with a portion of its premium underwritten by its new affiliate and the balance by other carrier partners that currently include Topa and Canopius US Insurance.

Spinnaker will continue to build out its third-party book of program business with other MGAs and program administrators.

But the deal with Hippo means it will have access to the additional investment for growth that it was seeking when it began exploring options for a new backer late last year.

For Hippo, there are presumably attractive economics to owning its own fronting carrier rather than paying open market rates for access to paper, as well as the appeal of an additional revenue stream on third party programs fronted by Spinnaker in a fast-growing segment of the industry.

Guaranteed access to fronting capacity also provides stability in a hardening marketplace where building and maintaining relationships with reinsurers is likely to be ever more important.