Real-estate investment trust Kite Realty Group is comfortably able to take 85% of its losses via its captive according to Theresa Severson, vice president for insurance & risk at the company.
In October 2021, Kite merged with Retail Properties of America (RPAI), which led to the formation of the fifth largest Real Estate Investment Trust (REIT) in the country. She explained that both REITs had separate captives prior to the merger.
RPAI had a reinsurance captive domiciled in Vermont which was fully fronted and took on the first $100,000 of all liability claims.
“On the property side, it only took a million dollars of cat per occurrence and in aggregate,” Severson said in GCP #67. “For the all other perils, it took $150,000 of each loss and eventually we increased that to $250,000.”
Prior to the merger, Kite had 83 shopping centres and a total of 12 million square feet. It also had a Tennessee-domiciled captive.
“Currently we have 185 open air shopping centres with three million square feet, and 40% of that portfolio is based in Florida and Texas”, she added.
She said that her prior insurance programme had “very little” catastrophe exposure but now 40% is in a cat zone.
“We are going to continue with the Vermont-based captive, and we’re in the process of closing down the Tennessee captive,” Severson revealed.
She added that the company transferred exposures that were in the legacy Kite captive into the Vermont captive, and highlighted that the goal at 1.12 renewal is to take a look at the rest of the programme and ultimately combine it.
Severson highlighted that when she was managing the old RPAI portfolio, she had the advantage of having the first $50m of the tower underwritten by the same carrier.
“This really allowed us some stability in what we were purchasing in the market,” she said. “So really, we kept the status quo with regards to what we were putting in the captive.”