Hagerty's Emerging Market in Vehicle Protection Services: Navigating Climate Risk and Automotive Enthusiasm for Long-Term Growth

The convergence of climate risk, automotive passion, and technological innovation is reshaping the vehicle protection services sector. At the forefront of this transformation is Hagerty, Inc. (NYSE: HGTY), a leader in specialty vehicle insurance and enthusiast-focused solutions. As hurricanes, rising sea levels, and extreme weather events intensify, Hagerty's strategic positioning in high-risk regions like Florida—and its ability to blend passion for cars with cutting-edge risk management—positions it as a compelling long-term investment.

Strategic Partnerships and First-Mover Advantage

Hagerty's 2025 strategic moves underscore its dominance in a niche but expanding market. The company's non-binding fronting arrangement with Markel—where Hagerty assumes 100% of underwriting and investment economics—highlights its first-mover advantage in optimizing profitability. By reducing fronting fees over time (from 2% initially to lower rates as policy volume grows), Hagerty strengthens its margins while retaining operational control. This partnership builds on its 2013 acquisition of Essentia, demonstrating a decade-long commitment to refining its insurance infrastructure.

Equally impactful is Hagerty's collaboration with The Hanover Insurance Group, which launched the Hanover Collector Car product. This partnership leverages Hagerty's expertise in valuations and claims for classic vehicles, paired with The Hanover's distribution network in high-risk states like Michigan and Illinois. By expanding to more states in 2026, Hagerty is tapping into a market where traditional insurers often shy away from underwriting due to climate-driven volatility.

Hagerty's foray into motorsports further cements its brand as a guardian of automotive culture. As the official presenting sponsor of the HSR Mitty, the company gains visibility among enthusiasts while aligning with events that celebrate driving heritage. This dual strategy—protecting vehicles and preserving car culture—creates a loyal customer base that values both functional and emotional value.

Profit Margins and Financial Resilience

Hagerty's 2024 financial performance validates its ability to thrive in a climate-risk-driven economy. Total revenue surged 20% year-over-year to $1.2 billion, with written premium up 15% to $1.044 billion. Operating income skyrocketed 538% to $66.4 million, and net income rose 178% to $78.3 million. These figures reflect Hagerty's mastery of cost containment (4% reduction in G&A expenses) and its ability to offset loss ratios through premium growth.

For 2025, Hagerty projects 12–13% revenue growth and 30–40% net income expansion, despite a $20 million investment in modernizing its technology stack. The rollout of the Duck Creek platform and advanced risk rating architecture will further streamline operations, enabling Hagerty to maintain margins even as climate-related claims rise.

Untapped Demand in High-Risk Regions

While direct data on Hagerty's Florida market penetration is sparse, the state's vulnerability to climate risks creates a clear opportunity. Florida's 2024 hurricane season—marked by Helene and Milton—caused $6B–$30B in damages, with inland flooding affecting areas previously considered low-risk. The Florida Department of Transportation's FY 2024–25 budget allocates $15.5 billion to infrastructure resilience, underscoring the state's urgent need for vehicle protection solutions.

Hagerty's focus on collector car insurance and customized risk management positions it to capture this demand. Traditional insurers often avoid Florida's high-risk zones, but Hagerty's E&S (Excess & Surplus) market expertise allows it to craft tailored policies for classic and specialty vehicles. With 20% of Florida's state highway pavement and 10% of bridges below standard, Hagerty's services—ranging from flood-resistant storage solutions to rapid claims processing—address both immediate and long-term needs.

Leadership and Innovation: A Catalyst for Growth

Hagerty's recent leadership additions—Adam Van Loon (Senior Vice President of Insurance Distribution) and Jesse McKendry (Senior Vice President of Insurance Product)—signal a strategic pivot toward data-driven, customer-centric solutions. Van Loon's global distribution experience and McKendry's background in tech-driven underwriting (from Lemonade and Progressive) will accelerate Hagerty's expansion into high-risk markets.

The company's investment in AI-driven underwriting models and real-time climate risk analytics further differentiates it. By integrating geospatial data and predictive modeling, Hagerty can price policies more accurately in regions like Florida, where traditional actuarial methods struggle to account for rapidly evolving climate patterns.

Investment Thesis: A Convergence of Forces

Hagerty's long-term growth hinges on three pillars:
1. Climate Risk as a Catalyst: As hurricanes and flooding become more frequent, demand for vehicle protection will outpace traditional insurance offerings.
2. Enthusiast-Centric Innovation: Hagerty's focus on collector cars and motorsports creates a loyal, high-margin customer base.
3. Tech-Enabled Efficiency: Modern platforms like Duck Creek and AI-driven underwriting will sustain margins even as claims costs rise.

For investors, Hagerty represents a rare intersection of specialty insurance, climate adaptation, and automotive passion. With a projected 21–29% Adjusted EBITDA growth in 2025 and a first-mover advantage in high-risk regions, the company is well-positioned to compound value over the next decade.

Conclusion

Hagerty's ability to transform climate risk into opportunity is a testament to its strategic foresight and operational agility. As Florida and other high-risk regions grapple with infrastructure vulnerabilities, Hagerty's blend of insurance innovation, enthusiast engagement, and tech-driven efficiency offers a compelling investment narrative. For those seeking exposure to a sector poised for compounding growth, Hagerty's vehicle protection services represent a high-conviction opportunity.

Positioning for the Future: Investors should consider Hagerty as a core holding in a portfolio targeting climate-resilient, niche-market leaders. With its financials robust, partnerships strategic, and market tailwinds strong, the company is not just surviving the climate crisis—it's thriving.