Demotech's Thoughts on the Florida-focused Carriers We Review and Rate

Update - Q1 Financial and Reinsurance Programs

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Aug 02, 2019, 12:58 ET

COLUMBUS, Ohio, Aug. 2, 2019 /PRNewswire/ -- This material provides an update on the first quarter 2019 financial statements and 2019 – 2020 reinsurance programs applicable to the Florida-focused carriers reviewed and rated by Demotech.

Our update on operating results as of June 30, 2019, will be held via a live webinar. Register as our guest on September 12, 2019, at 1 PM Eastern at https://attendee.gotowebinar.com/register/4902886576040841483. During our webinar on September 12, 2019:

Barry J. Koestler, II, CFA, Chief Ratings Officer, and Bob Warren, CPCU, CPA (Inactive), Client Services Manager, will present their thoughts on the financial status of the carriers referenced below, based upon a review of June 30, 2019, financial statements.
Wesley Todd, CEO, CaseGlide, a premier claims litigation management company, will share his observations on the initial impact of the legislation intended to reform the assignment of benefits anomaly that has been in place in Florida.
Catastrophe modeling experts will share their thoughts on if, how, or why initial projections for Irma, Michael, and Matthew crept upward in addition to sharing thoughts on model enhancements, Florida and countrywide, that we should expect to see in the future.

Today, we are pleased to release the results of the review and analysis of year-end 2018 financial information, Q1 2019 operating results, and the reinsurance programs placed by the Florida focused carriers reviewed and rated by Demotech. As a brief review of our role stabilizing the Florida residential property insurance marketplace, we offer the following history and perspective:

In 1996, the State of Florida, Florida Office of Insurance Regulation (OIR), and the Florida Residential Property Casualty Joint Underwriting Association (JUA) initiated an effort to depopulate the JUA. The depopulation effort included legislation to permit the State of Florida to offer financial incentives to insurers that depopulated the JUA.

Concurrently, the mortgage lending industry requested that the legislation include a provision requiring the newly capitalized insurers be acceptable to the secondary mortgage marketplace. Absent this provision, unrated start-up insurers would be unacceptable to place hazard insurance policies acceptable to the secondary mortgage marketplace.

When the State of Florida, the secondary mortgage marketplace, and the mortgage lending community needed a solution to this situation, they contacted Demotech and asked us to assist. We developed a procedure to review and rate newly formed insurers that has met the test of time. Since 1996, our process assisted the State of Florida, insurance agents, insurers, consumers, reinsurers, and mortgage lenders. For almost twenty-five years, we have utilized this process to review and analyze start-up insurers throughout the United States.

Over calendar years 2016, 2017, and 2018, catastrophes hammered the Sunshine State. Concurrently, established claims procedures, processes, and protocols in place in Florida continued to increase losses and loss adjustment expense. Reforms became law July 1, 2019, when Governor Ron DeSantis signed House Bill 7065 as a solution to the abuses.

House Bill 7065 included:

Providing a definition of an "assignment agreement"
Requiring execution, validity, and effect of an agreement to assign benefits
Prohibiting some fees and policy provisions related to managed repairs in an assignment of benefits agreement
Transferring specific pre-lawsuit duties under an insurance policy to the assignee
Shifting the burden of proof to prove failure to carry out such duties to the assignee
Requiring insurers to collect specified data on claims paid in prior periods
Allowing an insurer to make available a policy prohibiting assignment, in whole or in part, under certain conditions
Revising Florida's one-way attorney fee statute to incorporate a fee structure to be utilized in determining the fee amount due to an assignee filing suit against an insurer
Requiring service providers to provide an insurer and the consumer written notice of at least 10 business days before filing suit.

Other legislation enacted in 2019 enhanced the operating environment by increasing the loss adjustment expense reimbursement paid to insurers through the Florida Hurricane Catastrophe Fund to 10 percent of reimbursed losses, effective with contracts of June 1, 2019 and subsequent.

Demotech hopes that AOB reform, enhanced claims reimbursement by the Florida Hurricane Catastrophe Fund, and other enacted reforms will mitigate the size and frequency of future rate revisions. However, as Floridians await the emergence of demonstrable objective evidence of the recent reforms, Demotech is pleased that our review process provided sufficient direction and guidance on financial stability despite three consecutive years of natural catastrophes, and seven years of the cost of AOB running unabated through the loss experience of insurers.

Today we present Financial Stability Ratings^® (FSRs) reflecting our current perspective, which is based upon the analysis undertaken thus far in 2019, including Q1 2019 financials and the 2019 – 2020 reinsurance program including vertical and horizontal limits. The issuance of these FSRs indicates that each carrier submitted, and Demotech reviewed, at least the following:

2018 financial statement to review critical financial ratios and metrics at year-end
2018 statement of actuarial opinion as regards loss and loss adjustment expense reserves
2018 independent audit
2018 information related to a holding company or significant affiliates, if applicable
Preliminary vertical and horizontal catastrophe reinsurance program for 2019
Final vertical and horizontal catastrophe reinsurance program for 2019
Quarterly financial statement prepared as of March 31, 2019 to evaluate whether critical financial ratios and metrics remained acceptable
Financial stability of reinsurers providing protection to the carriers.

Insurer Reviewed by Demotech	Financial Stability Rating^®

American Coastal Insurance Company	A´
American Integrity Insurance Company of Florida, Inc.	A
American Platinum Property & Casualty Insurance Company	A
American Traditions Insurance Company	A
Anchor Property and Casualty Insurance Company	A
AutoClub Insurance Company of Florida	A
Avatar Property & Casualty Insurance Company	A
Bankers Insurance Company	A
Capitol Preferred Insurance Company	A
Castle Key Indemnity Company	A´
Castle Key Insurance Company	A´
Cypress Property & Casualty Insurance Company	A
Edison Insurance Company	A
FedNat Insurance Company	A
First Community Insurance Company	A
First Protective Insurance Company	A
Florida Family Home Insurance Company	A´
Florida Family Insurance Company	A´
Florida Peninsula Insurance Company	A
Florida Specialty Insurance Company ^	A
Frontline Insurance Unlimited Company	A
Gulfstream Property and Casualty Insurance Company	A
Heritage Property & Casualty Insurance Company	A
Homeowners Choice Property & Casualty Insurance Co	A
KIN Interinsurance Network	A
Monarch National Insurance Company	A
Olympus Insurance Company	A
Omega Insurance Company	A
People's Trust Insurance Company	A
Prepared Insurance Company	A
Safe Harbor Insurance Company	A´
Safepoint Insurance Company	A
Security First Insurance Company	A
Service Insurance Company	A
Southern Fidelity Insurance Company	A
Southern Oak Insurance Company	A
St. Johns Insurance Company, Inc.	A
Tower Hill Preferred Insurance Company	A
Tower Hill Prime Insurance Company	A
Tower Hill Select Insurance Company	A
Tower Hill Signature Insurance Company	A
TypTap Insurance Company	A
United Property & Casualty Insurance Company	A
Universal Insurance Company of North America	A
Universal Property & Casualty Insurance Company	A
US Coastal Property & Casualty Insurance Company	A
Weston Insurance Company	A

^: Reflects measures undertaken to revise the Company's business model

Our thoughts on the reinsurance carriers providing protection for the 2019 storm season and our assessment of the financial stability of these reinsurers are as follows:

Reinsurers Participating in 2019 Reinsurance Programs of Florida-focused Carriers	Demotech's Preliminary 2019 Perspective *	Domicile
ACE Property & Casualty through Chubb Tempest Re USA, LLC	Secure - 1	Pennsylvania
Aeolus Re Ltd	Secure - 1	Bermuda
Allianz Risk Transfer AG	Secure - 1	Liechtenstein
Allied World Assurance Company (U.S.) Inc.	Secure - 1	Delaware
Allied World Assurance Company Limited	Secure - 1	Bermuda
Allied World Reinsurance Mgt Co on behalf of Allied World Ins Co	Secure - 1	New Hampshire
AlphaCat Reinsurance Ltd.	Secure - 1	Bermuda
American Agricultural Insurance Company	Secure - 1	Indiana
American Home Assurance Company	Secure - 1	New York
American International Reinsurance Company Limited	Secure - 1	Bermuda
American Standard Insurance Company of Wisconsin	Secure - 1	Wisconsin
Amlin AG	Secure - 1	Switzerland
Armor Re II Ltd	Secure - 1	Bermuda
Aon Insurance Managers (Bermuda) Ltd/Securis Re	Secure - 1	Bermuda
Aquilo CatCo (through Hannover Ruck SE)	Secure - 1	Germany
Arch Reinsurance Limited	Secure - 1	Bermuda
Argo Re Ltd	Secure - 1	Bermuda
Ariel Re Bermuda obo Ariel 1910	Secure - 1	Bermuda
Artex SAC Limited	Secure - 1	Bermuda
Ascot Underwriting (BDA) Ltd	Secure - 1	Bermuda
Asia Capital Reinsurance Group Pte Ltd	Secure - 1	Singapore
Aspen Bermuda Limited	Secure - 1	Bermuda
Avatar Re, LLC	Secure - 1	Delaware
AXA XL	Secure - 1	Bermuda
AXIS Reinsurance Company	Secure - 1	New York
Axis Specialty Limited	Secure - 1	Bermuda
Berkley Re America/Berkley Insurance Company	Secure - 1	Delaware
Berkshire Hathaway Specialty Insurance Company	Secure - 1	Nebraska
BGS Services (Bermuda) Limited/Lloyds Syndicate	Secure - 1	United Kingdom
Blue Water Re, Ltd.	Secure - 1	Bermuda
CATCo Reinsurance Fund	Secure - 1	Germany
Cathay Century Ins Co Ltd.	Secure - 1	Taiwan
Catlin Insurance Company Limited	Secure - 1	Bermuda
Central Reinsurance Corporation	Secure - 1	Taiwan
Cerulean Re obo Fermat	Secure - 1	Bermuda
China Property & Casualty Reinsurance Company Limited	Secure - 1	China
Chord Re Consortium 9840	Secure - 1	United Kingdom
Chubb Tempest Reinsurance Ltd	Secure - 1	Bermuda
Cincinnati Insurance Company (The)	Secure - 1	Ohio
Citrus Re	Secure - 1	Bermuda
Convex Insurance UK Limited	Secure - 1	United Kingdom
Convex Re Limited	Secure - 1	Bermuda
Credit Suisse obo Hannover Ruck SE	Secure - 1	Germany
Credit Suisse obo Tokio Millennium Re AG	Secure - 1	Switzerland
DaVinci Reinsurance Ltd	Secure - 1	Bermuda
DEVK Ruckversicherungs	Secure - 1	Germany
DUAL Commercial LLC t/a Tamesis o/b/o National Union Fire Insurance Co	Secure - 1	Pennsylvania
Eclipse Re Ltd	Secure - 1	Bermuda
Elementum obo Tokio Millennium Re	Secure - 1	Bermuda
Employers Mutual Casualty Company	Secure - 1	USA
Endurance Specialty Insurance Limited	Secure - 1	Bermuda
Eskatos Capital Mgmt (Hannover Re paper)	Secure - 1	Germany
Everest Reinsurance Company	Secure - 1	Delaware
Factory Mutual Ins Co	Secure - 1	Rhode Island
Farm Mutual Reinsurance Plan	Secure - 1	Canada
Fidelis Insurance Bermuda Limited	Secure - 1	Bermuda
Fidelis Underwriting Limited	Secure - 1	United Kingdom
Fubon Insurance Company Ltd.	Secure - 1	Taiwan
General Insurance Corporation of India	Secure - 1	India
General Reinsurance Corporation	Secure - 1	Connecticut
Greenlight Reinsurance Ltd.	Secure - 1	Cayman Islands
Hamilton Re, Ltd	Secure - 1	Bermuda
Hannover Re (Bermuda) Ltd	Secure - 1	Bermuda
Hannover Reinsurance (Ireland) DAC	Secure - 1	Ireland
Hannover Ruck SE	Secure - 1	Germany
Harco National Insurance Company	Secure - 1	Illinois
Hiscox Insurance Co (Bermuda) Limited	Secure - 1	Bermuda
Horseshoe Re Limited (obo Coriolis Capital Limit	Secure - 1	Bermuda
Horseshoe Re Limited/Separate Account FC0028	Secure - 1	Bermuda
Houston Casualty Company	Secure - 1	Texas
Humboldt Re	Secure - 1	Guernsey
ILS Capital obo Prospero Re Ltd.	Secure - 1	Bermuda
Indigo Re	Secure - 1	Cayman Islands
Insurance Company of the West	Secure - 1	California
Kelvin Re Limited	Secure - 1	Guernsey
Korean Reinsurance Company	Secure - 1	South Korea
Lancashire Insurance Company Limited	Secure - 1	Bermuda
Lansforsakringar Sak Forsakrings AB (public)	Secure - 1	Sweden
LGT Capital Management Ltd. Obo Collateralised Re	Secure - 1	Switzerland
Liberty Mutual Insurance Company	Secure - 1	Massachusetts
Liberty Syndicate 4472	Secure - 1	United Kingdom
Lumen Re Ltd	Secure - 1	Bermuda
Maiden Reinsurance Ltd.	Secure - 1	Bermuda
Manatee Re LTD	Secure - 1	Bermuda
Mapfre Re, Compania de Reaseguros, S.A.	Secure - 1	Spain
Markel Bermuda Limited	Secure - 1	Bermuda
Market Re Ltd.	Secure - 1	Bermuda
MS Frontier Reinsurance Limited2	Secure - 1	Switzerland
Munich Reinsurance	Secure - 1	Delaware
National Liability & Fire Insurance Company	Secure - 1	Connecticut
National Union Fire Ins Co	Secure - 1	Pennsylvania
Navigators Insurance Company	Secure - 1	New York
Neon Underwriting Bermuda Limited/Lloyd's Syndicate 2468	Secure - 1	United Kingdom
Nephila obo Poseidon	Secure - 1	Bermuda
Nephila obo Rubik	Secure - 1	Bermuda
New India Assurance Company	Secure - 1	India
New Ocean Capital	Secure - 1	Bermuda
Oak Leaf Re Ltd. (Fully Collateralized CAT Bonds)	Secure - 1	Bermuda
Odin Re	Secure - 1	Bermuda
Odyssey Reinsurance Company	Secure - 1	Connecticut
Orange Grove Re Ltd.	Secure - 1	Bermuda
Osprey Re	Secure - 1	Bermuda
Oxbridge Reinsurance Limited	Secure - 1	Cayman Islands
Partner Reinsurance Co Ltd	Secure - 1	Bermuda
Partner Reinsurance Company of the U.S.	Secure - 1	New York
Peak Reinsurance Company Ltd.	Secure - 1	Hong Kong
PICC Property and Casualty Company Limited	Secure - 1	China
Pilar Capital obo Hannover Ruck SE	Secure - 1	Germany
Pompano Re Ltd	Secure - 1	Bermuda
Poseidon Re Ltd	Secure - 1	Bermuda
Promissum Re SPC Ltd	Secure - 1	Cayman Islands
Prospero Re Ltd.	Secure - 1	Bermuda
Qatar Re	Secure - 1	Qatar
QBE Reinsurance Corporation	Secure - 1	Pennsylvania
QuantEdge USA	Secure - 1	Bermuda
R+V Versicherung AG	Secure - 1	Germany
Radiant Ltd.	Secure - 1	Bermuda
Renaissance Reinsurance Limited	Secure - 1	Bermuda
Renaissance Reinsurance U.S., Inc.	Secure - 1	Maryland
Resilience Re	Secure - 1	Bermuda
Rubik Reinsurance Ltd	Secure - 1	Bermuda
Satec srl/New Reinsurance Company Ltd.	Secure - 1	Switzerland
SCOR Global P&C SE	Secure - 1	France
SCOR Reinsurance Company	Secure - 1	New York
Secquaero Re Amaral IC Limited	Secure - 1	Guernsey
Secquaero Re Arvine IC Ltd.	Secure - 1	Switzerland
Secquaero Re Rivaner IC Ltd.	Secure - 1	Switzerland
Securis Re I Ltd. Obo SRB 119	Secure - 1	Bermuda
Shelter Reinsurance Company	Secure - 1	Montana
Sirius International Insurance Corporation (public) Bermuda Branch	Secure - 1	Bermuda
Sompo Japan Canopius Reinsurance AG Bermuda Branch	Secure - 1	Bermuda
Swiss Reinsurance America Corporation	Secure - 1	New York
Taiping Reinsurance Company Ltd.	Secure - 1	Hong Kong
Third Point Reinsurance Company	Secure - 1	Bermuda
Toa Reinsurance Company of America	Secure - 1	Delaware
Tokio Millennium Re AG - Bermuda Branch	Secure - 1	Bermuda
Tokio Millennium Re AG (USA Branch of C0128)	Secure - 1	New York
Topsail Reinsurance SPC Ltd	Secure - 1	Cayman Islands
Tower Hill Re	Secure - 1	Cayman Islands
Transatlantic Reinsurance Company	Secure - 1	New York
Validus Reinsurance Ltd	Secure - 1	Bermuda
Vermeer Reinsurance Ltd.	Secure - 1	Bermuda
Wyndham Ins Co SAC	Secure - 1	Bermuda
XL Bermuda Ltd.	Secure - 1	Bermuda
Y-Bridge Insurance SPC	Secure - 1	Cayman Islands

*: Reference: FL Rule 69O-144.007 Credit for Reinsurance from Certified Reinsurers

Refer requests for additional information to Joseph L. Petrelli, ACAS, ASA, MAAA, President, Barry J. Koestler, II, CFA, Chief Ratings Officer, or Robert M. Warren, CPA, CPCU, Client Services Manager.

About Demotech, Inc.
Demotech, Inc. is a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers. Since 1985, Demotech has served the insurance industry by assigning accurate, reliable and proven Financial Stability Ratings^® (FSRs) for Property & Casualty insurers and Title underwriters. FSRs are a leading indicator of financial stability, providing an objective baseline of the future solvency of an insurer. Demotech's philosophy is to review and evaluate insurers based on their area of focus and execution of their business model rather than solely on financial size. Visit www.demotech.com for more information.

Update on Q2 2019 via Webinar on September 12, 2019
Register as our guest for the webinar on September 12, 2019 at 1 PM Eastern by visiting https://attendee.gotowebinar.com/register/4902886576040841483.

SOURCE Demotech, Inc.