Reinsurance for the Reciprocal

Note 12. Reinsurance for the Reciprocal

As of April 1, 2026, coverage for excess-of-loss catastrophe reinsurance from a panel of third-party reinsurers started at $35.0 million for per occurrence for all perils, up to a loss of $365.0 million. We also purchased reinstatement premium protection for the first three layers of our third-party placed excess-of-loss (“XOL”) program. In addition, our captive reinsurance business provides reinsurance support to improve capital efficiency for the Reciprocal. Our captive reinsurer provides reinsurance coverage for risks with low earnings volatility.

In July 2026, the Reciprocal obtained approximately $100.0 million of multi-peril collateralized catastrophe reinsurance protection through a catastrophe bond transaction. This coverage attaches above the top of the Reciprocal’s third-party excess-of-loss reinsurance tower, providing additional catastrophe protection beyond the $365.0 million upper limit of the XOL program described above. Under the arrangement, Harbor Crest Re Ltd., a bankruptcy-remote special purpose insurance vehicle, issued $100.0 million of Class A principal-at-risk notes and entered into a reinsurance agreement providing protection for certain losses arising from named storms, winter storms, severe weather events, wildfires, and fire-following earthquake events in the United States. The coverage is structured on an indemnity and per-occurrence basis and provides approximately four years of reinsurance protection. The proceeds from the notes are held in collateral accounts and are available to satisfy the reinsurer’s obligations under the reinsurance agreement. Premiums ceded under the arrangement will be recognized as ceded earned premium over the coverage period, while any recoveries are recognized in the period covered losses are incurred and recovery becomes probable. Costs directly attributable to obtaining the reinsurance coverage are deferred and amortized over the applicable coverage period, while other transaction costs are expensed as incurred. The Reciprocal entered into the transaction as part of its broader risk management and reinsurance strategy to diversify sources of catastrophe protection and enhance capital efficiency.

As of April 1, 2025, and for the twelve months ended March 31, 2026, coverage for excess-of-loss catastrophe reinsurance started at $25.0 million per occurrence up to a loss of $410.0 million. Additionally, the third-party quota share reinsurance contracts started at 7.5% of property and casualty losses, which included catastrophe events, bringing the effective retention for the Reciprocal from $25.0 million per occurrence to $23.1 million per occurrence. We also placed reinstatement premium protection to cover any reinstatement premiums due on the second through fourth layers.

Captive Quota Share Arrangement

The Reciprocal has historically utilized our captive reinsurance business as part of its capital management strategy. Effective April 1, 2025, our captive reinsurer began providing reinsurance support under its current arrangement to improve capital efficiency for the Reciprocal. Our captive reinsurer provides reinsurance coverage for risks with low earnings volatility, such as non-catastrophic weather quota share risks. This contract was approved for an initial term of 10 years but may be terminated annually by either Porch or the Reciprocal.

The effects of reinsurance on premiums written by the Reciprocal and earned for the three and six months ended June 30, 2026 and 2025, were as follows:


	Three Months Ended June 30,
	2026				2025
	Written		Earned		Written		Earned
Direct premiums	$	117,628	$	103,468	$	95,779	$	100,184
Ceded premiums	3,627		(12,238)		20,378		(21,229)
Net premiums	$	121,255	$	91,230	$	116,157	$	78,955


	Six Months Ended June 30,
	2026				2025
	Written		Earned		Written		Earned
Direct premiums	$	211,182	$	201,120	$	171,275	$	202,564
Ceded premiums	(16,921)		(33,064)		(11,263)		(60,295)
Net premiums	$	194,261	$	168,056	$	160,012	$	142,269

The effects of reinsurance on incurred losses and loss adjustment expense (“LAE”) for the three and six months ended June 30, 2026 and 2025, were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2026		2025		2026		2025
Direct losses and LAE	$	43,696	$	39,664	$	66,464	$	84,356
Ceded losses and LAE	(799)		(7,072)		(2,383)		(22,629)
Net losses and LAE	$	42,897	$	32,592	$	64,081	$	61,727

The detail of reinsurance balances due is as follows:


	June 30, 2026		December 31, 2025
Ceded unearned premium	$	419	$	24,654
Losses and LAE reserve	6,517		9,509
Reinsurance recoverable	(95)		3,411
Other	1,058		79
Reinsurance balance due	$	7,899	$	37,653