US-based Heritage Insurance Holdings has agreed to acquire Zephyr Acquisition (ZAC) and its wholly-owned subsidiary Zephyr Insurance, for around $120m.

The acquired business will allow Heritage to expand its insurance operations in Hawaii, as Zephyr provides specialty insurance services in the region.

The deal will also enable Heritage to diversify business operations and achieve larger synergies in reinsurance, in addition to expanding its presence outside of Florida.

Started operations in 2000, Zephyr provides wind-only insurance coverage for personal residential and commercial residential policyholders.

Zephyr’s inforce premium was around $68m, while its statutory surplus was $58m and unaudited GAAP equity was $63m, for the period ended 30 June.

Heritage chairman and CEO Bruce Lucas said: "The combination of our complementary business models will be immediately accretive to earnings, book value, and return on equity.

"As the industry evolves we believe companies that are able to successfully execute strategic acquisitions will experience better growth, diversification and reinsurance savings."

Subject to regulatory and other customary closing conditions, the deal is expected to complete in the fourth quarter of this year.

Heritage Insurance is a property and casualty insurance holding firm, which writes around $500m of personal and commercial residential premium through its agents.