Capital Management

The PURE Group Structure

Collectively, the companies that make up The PURE Group provide the PURE membership with exceptional financial strength and flexibility. At its center is the member-owned insurer, Privilege Underwriters Reciprocal Exchange (PURE). Fueled by surplus contributions from the membership, this is the entity that underwrites and issues policies. PURE is pooled with a reinsurance company, PURE Insurance Company (PIC), and the two share all premiums and losses equally (after the impact of third-party reinsurance)—note that this is exclusive of surplus contributions, 100% of which benefit PURE and its membership. The pooling agreement is designed to achieve three things: It increases the available surplus capital for PURE and its members, it provides enhanced capital flexibility, and it strengthens the alignment of interest with outside investors.

Privilege Underwriters, Inc. (PUI) is the holding company for PURE Risk Management LLC (PRM) and PIC; and provides both capital and operational resources for both.

PRM, a subsidiary of PUI, serves as the Attorney-in-Fact (independent management company) for PURE. PRM is paid a fee to provide marketing, underwriting, and claims administration services for PURE. In turn, PRM provides the human, technological, and operational resources required to run the insurance operations of PURE.

With the formation of Privilege Group Holdings in 2015, PUI was recapitalized with investments from two of the world’s preeminent private equity investors—Stone Point Capital and Kohlberg Kravis Roberts (KKR)—in addition to XL Catlin, a leading global insurance company. This recapitalization supports PURE’s continued independence during a period of massive consolidation in the industry.


Both PURE and the PURE Group (the combined assets of PURE and PIC),
have experienced a steady growth in admitted assets year-over-year.

Growing Impact of Surplus Contributions

Members contribute capital to PURE by making Surplus Contributions for the first five years of membership. These contributions, which are equal to a small percentage of a member’s premiums, provide a steady flow of capital to PURE, contributing to PURE’s financial strength and a much lower cost of capital than most stock insurers. This lower cost of capital contributes to PURE’s highly competitive rates. In 2015, Surplus Contributions reached $30.6 million.

Statutory Surplus

PURE members benefit and are protected by PIC’s access to additional capital and various capital flexibilities. In 2015, PURE’s claims paying ability was further strengthened as PIC accessed a portion of the capital commitment from XL Caitlin in the form of a $25 million below market surplus note in addition to a $25 million capital contribution from PUI. The PURE Group, which comprises both PURE and PIC, grew its statutory surplus by 23% to $251.8 million.

Deferred Acquisition Costs

Statutory accounting requires an insurer to book expenses when a policy is written, but revenue is earned pro-rata over the term of the policy. This puts a strain on a growing company. If we were to illustrate the matching of PURE’s revenue and expenses (as in GAAP), the PURE Group’s surplus would have grown by an additional $18 million in 2015.