Homeowners Offered Few Insurance Choices in Hurricane States

June 28, 2010

In most hurricane-prone states, homeowners have few choices of insurance coverage, with just eight property and casualty insurers in each state controlling up to 77.2 percent of the market share, according to Weiss Ratings.

Weiss identified Florida, Louisiana, North Carolina, South Carolina and Texas as the most hurricane prone states, based on the number of hurricane strikes recorded between 1851 and 2004, according to the National Hurricane Center. The rankings are: Florida (110); Texas (59); Louisiana (49); North Carolina (46); and South Carolina (31).

Florida has seen an uptick in companies to select from when shopping for homeowners insurance in recent years, with eight companies controlling only 38.4 percent of the market share. There is a question of the quality of the new entrants, however.

“While the risk has now been spread among more players, the financial strength of the new entrants is questionable, and consumers must monitor the health of the insurer they select, especially in light of the forecast for another active hurricane season,” said Melissa Gannon, vice president of Weiss Ratings.

Many start-up companies that received policies from Florida’s state-run insurer in recent years are financially unstable, according to Weiss Ratings. For example, Royal Palm Insurance Co. and Edison Insurance Co., which opened for business n 2006, are both rated E+ (Very Weak), while Peoples Trust Insurance Co., which began operating in 2008, is rated D- (Weak).

In Texas, eight carriers commanded 77.2 percent of the homeowners insurance market at year-end. In South Carolina, they held 68.2 percent of the market; in Louisiana, 63.3 percent; and in North Carolina, 61.1 percent, compared to 78.3 percent, 66 percent, 62 percent, and 58.5 percent, respectively, in 2002.

The following table reflects the eight companies with the largest market share in all hurricane-prone states combined. They are the eight largest carriers in the five hurricane-prone states overall, but not necessarily the largest eight in each state.

Group Premium Hurricane States ($000) Market Share State % Market Share Nat’l (%) Weiss FSR
State Farm Mutual Auto. Ins 3,594,323 21.2 21.6 B
Allstate Corp 1,462,700 8.6 10.0 B+
Zurich Financial Services Ltd 1,035,356 6.1 7.4 C
USAA Insurance Group 1,022,334 6.0 4.4 A+
Citizens Property Ins Corp 790,756 4.7 1.2 Unrated
Nationwide Mutual Group 743,580 4.4 4.3 B
Liberty Mutual Holding Co. 660,197 3.9 5.1 C+
Travelers Cos. 515,232 3.0 4.5 B
Total 9,824,478 57.9 58.5

Scale: A = Excellent, B = Good, C = Fair, D = Weak, E = Very Weak. Plus sign = top third of grade; minus sign = bottom third.

The Weiss Financial Strength Rating reflects the financial condition of the largest subsidiary in each group, and ratings of smaller subsidiaries may vary to some degree. State Farm Mutual Automobile Insurance Co. itself does not offer homeowners insurance while its subsidiaries do. Citizens Property Insurance Corp. writes policies only in Florida.

Of the 208 insurers with at least $10 million in homeowners premiums in Texas, South Carolina, Louisiana, North Carolina or Florida, Weiss Ratings gives 39 companies a grade of B+ (good) or higher, while 33 companies merit a grade of D+ (weak) or lower.

Among U.S. property and casualty insurers rated by Weiss Ratings, below are the five strongest with $10 billion or more in assets:

Strongest U.S. Property & Casualty Insurers (with a Weiss Rating of B+ or higher and assets of $10 billion or more; 12/31/09 data)

Institution Weiss Rating Assets ($mil)
State Farm Mutual Automobile Ins Co. B+ 100,681
Allstate Insurance Co. B+ 40,829
Federal Insurance Co. B+ 30,688
Hartford Fire Insurance Co. B+ 24,543
Travelers Indemnity Co. A- 21,250

Source: Weiss Ratings

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