Demotech warns some Florida carriers must “markedly improve” in 2021

With thoughts turning to the key mid-year reinsurance renewals and negotiations already underway for many Florida domestic insurance carriers, rating agency Demotech has warned that nine carriers need to report “markedly improved operating results in 2021” to sustain their current rating level.

Following up on its warning ten days ago that Florida’s insurance marketplace needs targeted legislative reform to address the numerous issues being faced by carriers in the state, while access to additional capital remains key for the “dysfunctional” marketplace, Demotech notes that the market’s carrier base are split, with some having taken actions to enhance the robustness of their businesses, while others are yet to make significant progress it seems.

While the renewals are still a way off and the cost of securing sufficiently large and responsive reinsurance programs has yet to be confirmed, for a number of Florida’s better performing insurance carriers, Demotech is already confident in their ability to secure sufficient protection.

Demotech believes that the following carriers are all “trending toward an upgrade” in terms of their ratings:

• American Integrity Insurance Company of Florida, Inc.
• Florida Peninsula Insurance Company
• Homeowners Choice Property & Casualty Insurance Company
• Southern Oak Insurance Company
• TypTap Insurance Company.

The next group are all the carriers that have been acquired or had meaningful capital injections and Demotech sees this cohort as likely to pass on costs to consumers, if no meaningful tort reform is seen in 2021.

Demotech also believes this group “now appear positioned to secure an appropriate reinsurance program as required in the next phase of our annual review process. ”

The following carriers are also are positioned to record and report markedly improved operating results in 2021 that meet or exceed the financial metrics that Demotech deems consistent with carriers assigned an FSR at the A, Exceptional, level as well as successfully address other phases of our annual review process:

• Centauri National Insurance Company
• Centauri Specialty Insurance Company
• Weston Insurance Company
• Weston Specialty Insurance Company
• Southern Fidelity Insurance Company

Of the next group of Florida primary insurance carriers, Demotech says they are “positioned to record and report markedly improved operating results in 2021 while concurrently meeting or exceeding financial metrics that Demotech deems consistent with carriers assigned an FSR at the A, Exceptional, level as well as address the upcoming phases of our annual review process.”

These carriers have taken “specific actions to enhance results as well as secure and infuse a substantial amount of additional capital to mitigate the cumulative impact of the operating results on their balance sheets” Demotech said”

• American Coastal Insurance Company
• Family Security Insurance Company (an affiliate of UPC)
• FedNat Insurance Company
• Heritage Property & Casualty Insurance Company
• KIN Interinsurance Network
• Maison Insurance Company (an affiliate of FedNat Ins Co)
• Monarch National Insurance Company (an affiliate of FedNat Ins Co)
• Tower Hill Preferred Insurance Company
• Tower Hill Prime Insurance Company
• Tower Hill Signature Insurance Company
• United Property & Casualty Insurance Company
• Universal Property and Casualty Insurance Company

Now we move onto the nine carriers that need to improve, according to Demotech.

First, six carriers who have already taken specific actions to improve their prospects, but still “must record and report markedly improved operating results in 2021 while concurrently meeting or exceeding financial metrics that Demotech deems consistent with carriers assigned an FSR at the A, Exceptional, level as well as other phases of our annual review process.”

• Access Home Insurance Company (an affiliate of Cypress P&C Ins Co)
• Avatar Property & Casualty Insurance Company
• Cypress Property & Casualty Insurance Company
• Lighthouse Property & Casualty Insurance Company
• Lighthouse Excalibur Insurance Company (an affiliate of Lighthouse P&C Ins Co)
• St. Johns Insurance Company

Then, the final three carriers, who Demotech said have only taken “initial actions” to improve their results, suggesting further work is required this year to avoid a downgrade.

Demotech said, “To sustain an FSR at the A level, they must record and report markedly improved operating results in 2021 while concurrently meeting or exceeding financial metrics that Demotech deems consistent with carriers assigned an FSR at the A, Exceptional, level as well as other phases of our annual review process. ”

• Olympus Insurance Company
• Gulfstream Property and Casualty Insurance Company
• Gulfstream Select Insurance Company

From now through the end of April Demotech will be reviewing the proposed reinsurance placements of all these carriers, while also considering their catastrophe response programs and looking at potential tort reform and how it could affect them.

It will also review their full-year 2020 results, as well as their Q1 2021 performance.

Reinsurance remains key to the Floridian primary homeowners carriers and the cost of it at the upcoming June renewals could be a critical factor for some of those seen as needing to improve.