ALIRT Insurance Research Highlights Rapid Growth and Emerging Risks in the Reciprocal Insurance Exchange Market

In its recent release, "Overview of Reciprocal Insurance Exchanges and Recent Market Trends," ALIRT Research discusses the current financial performance of this niche P&C sector as well as the rapid proliferation of new reciprocals into challenged property insurance markets.

HARTFORD, Conn., Oct. 29, 2025 /PRNewswire/ -- ALIRT Insurance Research has released its latest industry analysis, "Overview of Reciprocal Insurance Exchanges and Recent Market Trends," providing an in-depth assessment of the structural evolution, financial performance, and outlook of Reciprocal Insurance Exchanges (RIEs) in the U.S. property and casualty market.

RIEs—unincorporated insurance entities owned by policyholders, or "subscribers"—have been part of the U.S. insurance landscape since the late 19th century. However, ALIRT's new report shows a renewed surge in activity as new entrants emerge to address capacity shortages in property markets, particularly across the southern coastal states.

As of year-end 2024, 72 companies operated as pure RIEs, writing $51 billion in direct premiums and accounting for approximately 5% of total U.S. property and casualty premiums. Despite this modest share, the sector has seen a wave of growth, with 36 new RIEs formed between 2017 and 2025, including 18 new exchanges formed since early 2024, most specializing in homeowners coverage in hurricane-prone regions such as Florida, Texas, and Louisiana.

"Reciprocal Insurance Exchanges are once again stepping in to fill coverage gaps, this time in high-risk property markets," commented Ricky Cheney, senior analyst at ALIRT and author of the report. "Their growth underscores both the innovation and the financial vulnerabilities that come with insuring catastrophe-exposed regions."

The report highlights the structural distinctiveness of RIEs, which differ from stock or mutual insurers in that policyholders share directly in profits and losses and appoint an "attorney-in-fact" (AIF) to manage operations. This model allows capital flexibility but can also create risk misalignment between policyholders and investors.

Financially, the RIE sector presents a bifurcated landscape. While the largest exchanges—such as USAA, Farmers, Erie, Auto Club, and CSAA—maintain strong capitalization and conservative operations, smaller and newer RIEs often face pressure from volatile underwriting results. The report notes that eight RIEs posted ALIRT Scores below 30, signaling weak financial performance.

ALIRT also warns that the increasing role of private investors and managing general agents in supporting new RIEs through surplus notes could introduce "moral hazard" dynamics, as external investors may be less exposed to underwriting losses while still profiting from management fees.

Nevertheless, the report strikes a cautiously optimistic tone. Legal reforms in Florida and Louisiana, along with a stabilizing reinsurance market, are expected to provide some relief to newer RIEs navigating these challenging markets.

For more information, please contact David Paul at david.paul@alirtresearch.com

About ALIRT Insurance Research
ALIRT Insurance Research is an independent financial analysis firm specializing in monitoring insurer solvency and performance trends for institutional clients. Based in Hartford, Connecticut, ALIRT provides analytical insights that assist organizations in managing insurance company exposure and maintaining fiduciary oversight.

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SOURCE ALIRT Insurance Research