Super Regional P/C Insurers™

Multi-State, Players Multi-Line Revealed

While many property/casualty insurers referred to themselves as super regionals, the definition of a super regional insurer remained unclear until the Feb. 12, 2007, issue of Insurance Journal where original criteria and an objective definition were created for the first Super Regional Property/Casualty Insurers™ list. Demotech Inc., the official research partner of Insurance Journal, has once again been called on to examine the criteria, make changes to the composition of that criteria and update the Super Regional P/C Insurers™ list.

To continue the discussion on the subject of what constitutes a super regional insurer and to give definition to this important group of insurers, Demotech, an actuarial services firm based in Columbus, Ohio, analyzed year-end 2007 data. This data was utilized to classify and stratify those insurers reporting data to the National Association of Insurance Commissioners (NAIC).

Demotech Classification System

The experts at Demotech refined their classification system for property/casualty insurance companies. The Demotech Company Classification System categorizes all property/casualty insurers into one of 11 categories based on an analysis of data reported by the companies to the NAIC.

The 11 categories that comprise the system are nationals, near nationals, super regionals, regionals, state specialists, coverage specialists, strategic subsidiaries, risk retention groups, surplus lines carriers, reinsurers and companies with less than $1 million in direct written premium.

A company cannot be assigned to more than one category. Therefore, a company not designated as a super regional is given another classification, perhaps near national, regional, or state specialist.

“Super regional insurers are critically important to the insurance industry and to their agents, producers and insureds,” said Joseph Petrelli, president, Demotech. “These companies are strong, stable markets that have been working hard for their agents and insureds. This is why Insurance Journal initially expressed interest in quantifying and identifying what criteria can be used to define an insurer as a super regional.”

Super Regional Criteria and Thresholds

To select the companies for the Super Regional P/C Insurer™ list, Demotech used these specific, objective qualifying criteria and thresholds:

• Active, individual companies not under regulatory supervision at Dec. 31, 2007;
• Reporting data to the NAIC using the property/casualty annual statement format;
• At least $1 million of direct written premium in each of two to 34 states at Dec. 31, 2007;
• Less than 90 percent of Dec. 31, 2007, direct written premium in any one state;
• Less than 90 percent of Dec. 31, 2007, direct written premium in any one line of business;
• Policyholders surplus of at least $100 million at Dec. 31, 2007;
• Net written premium of at least $50 million at Dec. 31, 2007;
• Direct written premium of at least $25 million at Dec. 31, 2007.

In general, a Super Regional P/C Insurer™ is an individual company writing multiple lines of insurance in multiple states. Risk retention groups, surplus lines insurers and reinsurers are not eligible for the super regional category.

The 2008 Super Regional Property/Casualty Insurers™ List

Utilizing these quantitative criteria, Demotech identified 152 Super Regional P/C Insurers™ for 2008, based on year-end 2007 annual statement data. This Insurance Journal special report presents the Super Regional list both alphabetically and by size as ranked by direct premiums written as of Dec. 31, 2007. Also presented are the 32 companies that are new to the Super Regional list, as well as 19 insurers that are no longer classified as Super Regionals on the list, but have been reclassified into another one of Demotech’s categories based on year-end 2007 information.

Insurance Journal and Demotech want this year’s report to continue the discussion on the role of super regionals, as well as the definition and criteria used in determining the classification, so that future reports can continue to refine an industry definition of Super Regional P/C Insurers™.

“Insurers and interested readers are encouraged to examine the selection criteria and thresholds used to determine the 2008 Super Regionals list,” said Barry J Koestler II, CFA, senior financial analyst and chief ratings officer, Demotech. “Our selection criteria are quantitative and transparent. We remain committed to setting benchmarks at levels that accurately categorize the industry.”

Both Petrelli and Koestler stressed that this is an objective stratification of the companies that comprise the industry, not ratings of the individual insurers. Inclusion on the list of Super Regionals is not meant to suggest that a company is superior to companies not categorized as Super Regionals.

Future issues of Insurance Journal will report on state specialists, coverage specialists, regionals and other classifications created and defined by Demotech.

Since 1985, Demotech Inc. has been providing independent Financial Stability Ratings® of property/casualty insurers and title insurance underwriters. Its services also include statements of actuarial opinion and pricing assistance. Visit www.demotech.com for more information.

Please send suggestions, comments and criticisms to Joe Petrelli at jpetrelli@demotech.com or Andrew Simpson at asimpson@insurancejournal.com.

Topics Carriers Property Property Casualty Casualty