Independent Regional and Specialty Insurers Have Addressed Availability and Affordability for Centuries Including Residential Property Insurance, According To Demotech

COLUMBUS, Ohio, Oct. 16, 2025 /PRNewswire/ -- Having recently discussed the role of independent, regional and specialty carriers at the Casualty Loss Reserve Seminar in Philadelphia in September of 2025, it was made clear that national insurance brands dominate online ads as well as TV and radio advertising. This may lead some to believe that "bigger is better." Yet, as of year-end 2024, in a property and casualty (P&C) insurance industry reporting to the National Association of Insurance Commissioners of 2,623 insurers, only 75 had $250,000,000 of surplus, wrote $250,000,000 of direct and net premium in 2024, had no line of business at or above 90% of total direct written premium, and wrote at least a $1,000,000 in 45 or more states. That is correct, only 2.9% of the P&C insurance industry is referenced as "Nationals" in Demotech's P&C Company Classification System.

Although some prefer larger, well-known insurers to provide all coverages to all policyholders, the reality is that many of these "larger, well-known insurers" take their capacity off the table when market conditions are less than optimal, from their perspective. For example, in the mid-1980s, the unavailability and unaffordability of liability insurance led to the passage of the Federal Liability Risk Retention Act. According to the website of the National Risk Retention Association, certain businesses and professions faced escalating liability insurance premiums and limited availability, particularly for products liability. This situation resulted in certain general and professional liability insurance coverages being unavailable as well as unaffordable.

Congress responded by enacting the Products Liability Risk Retention Act (PLRRA) in 1981. In 1986, given the success of PLRRA, all forms of liability insurance became eligible to be offered through risk retention groups, with the passage of the Liability Risk Retention Act (LRRA).

Congress passed LRRA to encourage the formation and growth of risk retention groups (RRGs), a specialty carrier that differs from traditional insurers in that they can sell insurance to group members, who are shareholders, but not to the public, i.e., consumers. A unique facet of RRG operations is that once an RRG is chartered in its home or domiciliary state, the RRG is allowed to operate nationwide exempt from nearly all other insurance laws of the other states.

RRGs utilize focused insurance coverage to address the needs of their member-insureds while relying on the expertise of member-owner-insureds to develop procedures, processes, and protocols, including risk management, education, and training, to sustain the affordability of premiums to members. Had "larger, well-known insurers" remained markets for liability insurance coverages, there would have been no need for the development and passage of PLLRA or LRRA.

Risk retention groups rely on subject matter expertise, well-crafted insurance policies and endorsements, and the complementary nature of their reinsurance program to execute their business models. Although they do not possess the level of admitted assets or net worth of "larger, well-known insurers," they can offer the necessary coverage using rates that are not excessive, inadequate, nor unfairly discriminatory by securing reinsurance.

On the property insurance side of the street, over the past few decades, encouraged by the success of the take-out carriers that depopulated the Florida Residential Property Casualty Joint Underwriting Association in 1996, independent, regional, often state specific property insurers, have commenced business to write residential property insurance in jurisdictions where "larger, well-known insurers" have withdrawn, retreated, or reduced capacity for business reasons specific to operations or their appetite for risk and exposure in certain jurisdictions. Those who view this phenomenon as a step backwards are unfamiliar with the development of property insurance markets in the history of the United States. There was a time when "all insurance was local."

According to its website, The Philadelphia Contributorship is the nation's oldest property insurance company. The Company was formed in 1752 as a mutual insurance company, i.e., policyholders share the risks. In 1752, Philadelphia had approximately 15,000 inhabitants protected by eight volunteer fire units. Fire prevention (risk management) played a role in the planning of the city. Streets were wider than average. Brick or stone were building materials.

Policyholders would pay a deposit, refundable at the end of a seven-year period, less a fee for the survey, policy, and fire mark. Prior to accepting a property, the insurer sent surveyors to inspect each building. The directors of the Contributorship reviewed the reports and established a rate.

Throughout the early history of the emergence of regional property insurance carriers, citizens, whether residential or agrarian, rural or urban, English speaking or not, came together to form mutual insurers. Today, there are hundreds of insurers providing residential property insurance that have been in continuous operation for over a century, some over two centuries. Rather than become national, many write in the counties they protected when they commenced operations.

These carriers were formed because coverage was needed in their geographical area. The founders committed to understanding the risk and exposure within their area and addressing that risk and exposure in the proper manner. The utilization of a complementary reinsurance program, including catastrophe reinsurance, as a surrogate for capital and surplus has provided access to tools to mitigate exposure and concentration issues. One does not survive over a century writing risks that the "larger, well-known insurers" decline by being lucky. One does so by successfully executing and refining their business model.

Independent, regional and specialty insurers, whether focused on casualty or property lines, rely on the complementary nature of their reinsurance program and their execution of their business model to prosper. Although some view concentration of risk in a jurisdiction or line of insurance as problematic, regional insurers focus on solutions to the challenges deterring "larger, well-known insurers" from remaining in that market. National carriers prefer consistency of judicial interpretations as well as predictable regulatory oversight, often eschewing catastrophe exposure due to the potential volatility on earnings, whether caused by natural disasters or fluctuations in the cost of catastrophe reinsurance. In contrast, independent, regional and specialty insurers, whether owned by policyholders, members, or otherwise privately held, are willing to absorb occasional operating losses because serving a community is a component of their business model.

The capability to evaluate independent regional and specialty carriers that focus on specific jurisdictions or certain lines of insurance is similarly unique from the capability to evaluate "larger, well-known insurers." Demotech, Inc. is proud to have been the first to develop a process to review and rate independent, regional and specialty insurers relying on reinsurance for claims paying ability. We were the first to develop a Company Classification System that focuses on business model, execution of the business model, and the complementary nature of the carrier's reinsurance program. Carrier size is not a component of our review and analysis process.

Our philosophy, research, and team members have positioned Demotech as an independent, regional and specialty insurer's best alternative.

SOURCE Demotech, Inc.