Demotech Has Reviewed Year-end 2018 Financial Information of Florida Property Insurers

Feb. 18, 2019 – Prior to the release of year-end 2018 financial information to the public, Demotech has reviewed management’s compilation of the year-end 2018 financial information of carriers, holding companies, affiliates and subsidiaries as well as sufficient interaction with management, including analysis of the assumptions underlying the financial data to announce the affirmation of 51 Financial Stability Ratings® (FSRs).

Based upon the frequent communication and exchange of information by and between representatives of Demotech and representatives of the Companies as well as the assurances of management that their filed financial information will be consistent with the information presented to us, which met our requirements through the continued application of management’s enterprise risk management protocols, consolidation, or the infusion of sufficient capital to permit management to continue to implement its business model, affirmations are applicable to:

  • American Coastal Insurance Company
  • American Integrity Insurance Company of Florida, Inc.
  • American Platinum Property and Casualty Insurance Company
  • American Strategic Insurance Corp
  • American Traditions Insurance Company
  • Anchor Property and Casualty Insurance Company
  • ASI Assurance Corp
  • ASI Home Insurance Corp
  • ASI Preferred Insurance Corp
  • Auto Club Insurance Company of Florida
  • Avatar Property & Casualty Insurance Company
  • Bankers Insurance Company
  • Capitol Preferred Insurance Company
  • Castle Key Indemnity Company
  • Castle Key Insurance Company
  • Edison Insurance Company
  • FedNat Insurance Company
  • First Community Insurance Company
  • First Protective Insurance Company
  • Florida Family Home Insurance Company
  • Florida Family Insurance Company
  • Florida Peninsula Insurance Company
  • Florida Specialty Insurance Company *
  • Frontline Insurance Unlimited Company
  • Gulfstream Property and Casualty Insurance Company
  • Heritage Property & Casualty Insurance Company
  • Homeowners Choice Property & Casualty Insurance Company
  • Monarch National Insurance Company
  • Olympus Insurance Company
  • Omega Insurance Company
  • People’s Trust Insurance Company
  • Prepared Insurance Company
  • Progressive Property Insurance Company
  • Safe Harbor Insurance Company
  • Safepoint Insurance Company
  • Security First Insurance Company
  • Service Insurance Company
  • Southern Fidelity Insurance Company
  • Southern Fidelity Property & Casualty Insurance Company **
  • Southern Oak Insurance Company
  • St. Johns Insurance Company, Inc.
  • Tower Hill Preferred Insurance Company
  • Tower Hill Prime Insurance Company
  • Tower Hill Select Insurance Company
  • Tower Hill Signature Insurance Company
  • TypTap Insurance Company
  • United Property & Casualty Insurance Company
  • Universal Insurance Company of North America
  • Universal Property & Casualty Insurance Company
  • US Coastal Property & Casualty Insurance Company
  • Weston Insurance Company

*Florida Specialty entered into additional reinsurance agreements that effectively cede 100% of risk that would have been borne by the Company.  Given that the reinsurance protection in place remains intact through May 31, 2019, policyholders and claimants are protected. The Company is evaluating a transition to an alternative business model.

**Southern Fidelity Property & Casualty Insurance Company will be merging into Capitol Preferred Insurance Company in 2019.  Given that Southern Fidelity Property & Casualty Insurance Company and Capitol Preferred have strong balance sheets, realistic pricing, and excellent reinsurance in place, policyholders are protected.

As part of the year-end affirmation process, each carrier has demonstrated to the satisfaction of Demotech that their soon-to-be issued year-end 2018 financial statements will reflect:

  • Realistic estimates of gross and net loss and loss adjustment expense reserves related to claims arising from Hurricanes Irma (2017) and Michael (2018)
  • Realistic estimates of the impact of the assignment of benefits situation on gross and net loss and loss adjustment expense reserves
  • Realistic estimates of gross and net loss and loss adjustment expense reserves related to non-catastrophe claims outstanding as of year-end 2018, known and incurred but not reported.

Concurrently, these companies have demonstrated to Demotech that they have in place:

  • Reinsurance of sufficient quality and quantity to expect reimbursement for outstanding losses and loss adjustment expenses ceded to reinsurers, including insurance linked securities
  • Claims procedures, protocols, processes, and practices that are sufficiently responsive to enable the Company to detect and address the impact of any future adverse interpretations of contract wording in a timely manner
  • Policy pricing and rate level analysis capabilities to provide the Company with an opportunity to earn a reasonable rate of return during 2019 despite the assignment of benefits situation, with rate level reviews and analysis as an integral component of their enterprise risk management protocols.

According to Joseph Petrelli, President, Demotech:  “Demotech has been actively reviewing and monitoring carriers and critical aspects of Florida’s legislative, judicial, and carrier operating environment at least quarterly basis since 1996. Although many attempt to shape the discussions of the current operating environment based upon the challenges associated with addressing the abuses often applicable to assignment of benefits, our long-tenured, credentialed analysts have the requisite knowledge associated with more than twenty years of the ebb and flow of pricing, loss and loss adjustment expense, coverage interpretations, as well as the evolution and enhancements of catastrophe modeling along with the introduction of alternative capital and the impact on catastrophe reinsurance purchases.  These affirmations reflect the on-going dialogue, communication, and analysis that we have had with management.  Our review process does not start and stop with quarterly statements.  Our first quarter 2019 operating results, review of 2019 reinsurance programs, and corporate responses to Florida’s operating environment is a continuous and on-going process.”

“Although carriers may not yet be affirmed, Demotech has had similar communication with those carriers.  Given our carrier specific requirements associated with sustaining an FSR, in some situations it seemed prudent to await reported year-end 2018 financial statements that reflected final decisions of management prior to evaluating the efficacy of an affirmation.  A final recap based upon a review of the year-end 2018 financial information filed by carriers will be forthcoming as soon as practical.  As we have also had similar communications with the 350 plus carriers that we review and rate outside of Florida, a firm release date for Florida property writers is not yet available.”

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