Let’s stop the urban myth about Best and a five year requirement. Visit Best’s website and you can find their guide to rating new formations. How do you think companies like Ironshore and other Bermuda start-ups survive without ratings? In addition to ASI, Best even gave PURE an A- rating as a Florida start-up. It’s a lie that Best won’t rate companies for five years and it distracts from the fact that these companies are so leveraged they couldn’t get rated in 5, 10 or 20 years. Best rates good start-ups. That’s an inconvenient truth.
Agents need to take note here especially on the Northern Capital side of things. If I wrote with them (and I don’t) I would probably be searching for another place for my clients. The HomeWise situation doesn’t smell right, but I don’t know enough about it to comment.
Just a question for anyone who may know at Northern Capital or is familiar with the situation…If you’re scrambling for money when the wind isn’t blowing, what’s going to happen when it does?
Demotech provides a valuable service none of the other ratings firms will— it looks at the financials of the smaller and newer carriers. Without Demotech at least trying to report what’s going on with these carriers, agents and insureds would be in total darkness.
No question there is a need for Demotech. But being a Northern agent for 30 years, AM Best was the only rating that mattered. I hadn’t even heard of Demotech until I moved to FL. My concern with Demotech is the A rating given to almost every startup I reviewed. There should be a separate classification for companies until they have some kind of a record.
“My concern with Demotech is the A rating given to almost every startup I reviewed.”
A is the 3rd rating which is a little misleading in my opinion. That said, these startups rely heavily on reinsurance. A good business plan and proper reinsurance probably does merit an A rating. The problems start when companies decide to grow too fast or they don’t grow fast enough. There’s a fine line in that regard.
The smaller and newer carriers you should be concerned about are the ones that do NOT have any Demotech rating. To me, that means they lack transparency and could be hiding something.
it is almost impossible to not get a Demotech rating for the first few years due to the requirements of the OIR. I know this from experience with several of these startups problem is who is running the show after the start-up.
I understand that the A rating is the third rating, but it probably should have another distinction. Too many agents throw around the A rating as if it means there’s nothing to be concerned about with the company. Having a different rating might make consumers delve a little deeper before switching from an established company to one of the start ups.
More than 10 years ago, demotech was the only company to rate my insurance company, American Strategic. Now everyone wants to rate them. Demotech saw the diamond in the rough.
ASI is a perfect example of how the A rating at Demotech can mislead the public. ASI is one of the few AM Best-rated companies actively selling in FL and they have an A- rating with Best. ASI has an A” (A Double Prime) rating with Demotech, but the consumer could be confused that A” and A are essentially the same.
The reason AM Best didn’t rate ASI as early as Demotech is AM Best requires a company to be in business five years to be rated.
Demotech may not be the best measure of a company’s solvency (seems like Mr. Solvent is the only one holding the cystal ball right now) however they have improved their forecasting within the last year. I believe they withdrew the Edison & Magnolia ratings before things fell apart. Given the absence of any other rating service and Best’s 5 year requirement, I would like to see Demotech get it right and be a useful tool. The state of Florida has certainly been no help.
You can keep ragging on Demotech or you can accept the fact that they are for real and they assisted in the stabilization of the marketplace when others walked away from Florida.
Also, before we get excited about insurers with Best ratings, keep in mind that 12 to 16 insurers rated by Best went under when Hurricane Andrew blew through Florida. Ask Tom Gallagher, he had to liquidate them! As a result of Best’s terrible track record with Andrew, today, Best’s rating requirements are, considered by some, arbitrary and self-serving.
Also, regarding Demotech, a study prepared by 3 Florida State University PhDs indicated that – countrywide – Demotech rates more insurance companies than Moodys, Fitch and Standard and Poors’ combined.
We would not have a Florida property insurance market without Demotech.
Is there a Florida property insurance market? Or is there a house of cards not too dissimilar from the AIG swaps? A company goes from about $500,000 in premium to $95million in premium in three years, and no one bats an eye? A commendation from a magazine like INC. for a small start up insurer should be a sign of impending doom, not something to celebrate. Too much growth, too fast, and thank the gods of weather the wind didn’t blow in Florida the past few years.
Florida doesn’t have a market. It has a collection of highly leveraged bets strung together on a chain of politicians’ lies to the voters. When the wind again, blows, please don’t burden my insurance or my federal taxes with your sorry cries for guaranty funds or federal bailouts.
I’m not slamming Demotech, and there’s no question they perform an essential service for the FL property insurance market. My complaint is the use of the A rating for brand-new companies. I would like something where the consumer would be better alerted to the tenure of the company. Maybe something like A0 for the first year of business, A1 for the second, A2 for the third, etc. Once five years old, you could drop the number from the rating.
I remember when these carriers came into our offices and told us they would get a Best Rating, but they needed to wait 5 years. Not only has that proven to be a lie, but how many more years do we watch First Protective or Sunshine State write at nearly 10 to 1 before someone (including Demotech) cries foul? If they told us they werent getting a Best Rating because the standards are exceptionally high, I might feel better. They all try to fall back on the lie that Best won’t rate new companies or Florida companies while ASI and PUR seem to get it done. Demotech ratings should be like non-admitted. You should need to show affadavits that you simply coulnt get it placed with a Best-rated carrier before using a Demotech company.
I have no crystal ball. As an agent you can request to see reinsurance agreements and balance sheets. Just ask! Carriers who are writing 10 times their surplus in premium, even with reinsurance in play, aren’t likely to be long term players. Additionally, look at the carrier’s appetite for new business. Are they overly conservative, not willing to write anything at all, or are they overly competitive. Either one could spell trouble.
I would guess that most insurance agents want to trust the system and have available markets. Unfortunately the system is not to be trusted. I’d rather have no markets than garbage markets.
There are more than 1,000 single state property insurance companies duly licensed and operating in the US. Many of these smaller, property writers have been around since the 1850s. They are heavily reinsured.
That Florida has several smaller, heavily reinsured carriers is NOT unique to Florida. It happens in every state in the country.
That’s an interesting notion that Florida is not unique. Because I heard that there was not a single state in the country where the Homeowners market share of A-rated Best-rated companies was below 90%. In Florida it’s below 20%. Other states have small companies but they don’t write that much and don’t face the volatility of Florida. The margin for error in Florida is so great that a rating should mean more, not less. Somebody please find a state where non-rated carriers have more than 10% of the market…
SWFL agent, I just want my clients to be protected when the wind blows. Northern Capital offered me an appointment back in 2007. I didn’t like what I saw then, and their plan to add additional lines of business and another homeowner’s company didn’t seem to mesh with their surplus position.
That said, I’d really like to be proven wrong about them. I don’t like to see anyone go out of business.
A year or two ago, I reviewed the detailed financials of about 30 of the Florida start up companies. All had A ratings from Demotech. Not one had sufficient experience or financial wherewithall to survive a significant Florida hurricane. I’m glad to see Demotech removing their rating from a few of these companies, but I have to conclude from my own review that their rating criteria isn’t sufficient in the first place.
Forget Demotech, for 5 million you can buy an A rating. Check out Weiss Ratings, every D rated company on their list has said goodbye to Florida. They were so right on the money with Poe, Edison, Coral and now Northern Capital.
Demotech identified Poe 8 months before Best. Edison is negotiating with another company. Weiss Ratings do not like any company that uses a lot of reinsurance.
The reason why there are so few AM Best rated carriers is because it takes too much capital to write homeowners in FL. To attract investors, carriers need to achieve a 15 – 20% ROC which they can’t do today because of price control which makes it hard to obtain capital. It really is that simple.
And, the fact that the insurer of last resort, State run Citizens Insurance, competes directly with private companies, but does not have to follow the same NAIC/DOI regulations as the private companies suppressing premiums artificially.
I ran into this article doing some research on homeowners. I live in Louisiana. I was doing a price comparison on new insurance. Homewise is giving me a real attractive rate compared to what I have now. I also noticed it did not have an am best rating it had a demotech rating. I don’t want to be stuck with bad insurance if another hurricane comes. What are your thoughts on Homewise?? Any info. would be appreciated.
Let’s stop the urban myth about Best and a five year requirement. Visit Best’s website and you can find their guide to rating new formations. How do you think companies like Ironshore and other Bermuda start-ups survive without ratings? In addition to ASI, Best even gave PURE an A- rating as a Florida start-up. It’s a lie that Best won’t rate companies for five years and it distracts from the fact that these companies are so leveraged they couldn’t get rated in 5, 10 or 20 years. Best rates good start-ups. That’s an inconvenient truth.
Just heard a new company is coming to Florida. They will be writing all lines of property insurance.
GONE WITH THE WIND INSURANCE COMPANY.
Agents need to take note here especially on the Northern Capital side of things. If I wrote with them (and I don’t) I would probably be searching for another place for my clients. The HomeWise situation doesn’t smell right, but I don’t know enough about it to comment.
Just a question for anyone who may know at Northern Capital or is familiar with the situation…If you’re scrambling for money when the wind isn’t blowing, what’s going to happen when it does?
Does the Demotech rating have ANY value? Other than making a policy acceptable to mortgage holders, that is…
You have to give Demotech some credit for catching these companies before they leave policyholders high and dry.
Agreed. Maybe this will help instill confidence that Demotech is a viable rating agency.
Demotech provides a valuable service none of the other ratings firms will— it looks at the financials of the smaller and newer carriers. Without Demotech at least trying to report what’s going on with these carriers, agents and insureds would be in total darkness.
No question there is a need for Demotech. But being a Northern agent for 30 years, AM Best was the only rating that mattered. I hadn’t even heard of Demotech until I moved to FL. My concern with Demotech is the A rating given to almost every startup I reviewed. There should be a separate classification for companies until they have some kind of a record.
“My concern with Demotech is the A rating given to almost every startup I reviewed.”
A is the 3rd rating which is a little misleading in my opinion. That said, these startups rely heavily on reinsurance. A good business plan and proper reinsurance probably does merit an A rating. The problems start when companies decide to grow too fast or they don’t grow fast enough. There’s a fine line in that regard.
It’s wise to read up on what the Demotech ratings mean.
The smaller and newer carriers you should be concerned about are the ones that do NOT have any Demotech rating. To me, that means they lack transparency and could be hiding something.
it is almost impossible to not get a Demotech rating for the first few years due to the requirements of the OIR. I know this from experience with several of these startups problem is who is running the show after the start-up.
to add to my earlier comment, Northern Capital/Landmark One was one of the companies I worked with at there start…
I understand that the A rating is the third rating, but it probably should have another distinction. Too many agents throw around the A rating as if it means there’s nothing to be concerned about with the company. Having a different rating might make consumers delve a little deeper before switching from an established company to one of the start ups.
More than 10 years ago, demotech was the only company to rate my insurance company, American Strategic. Now everyone wants to rate them. Demotech saw the diamond in the rough.
ASI is a perfect example of how the A rating at Demotech can mislead the public. ASI is one of the few AM Best-rated companies actively selling in FL and they have an A- rating with Best. ASI has an A” (A Double Prime) rating with Demotech, but the consumer could be confused that A” and A are essentially the same.
The reason AM Best didn’t rate ASI as early as Demotech is AM Best requires a company to be in business five years to be rated.
Demotech may not be the best measure of a company’s solvency (seems like Mr. Solvent is the only one holding the cystal ball right now) however they have improved their forecasting within the last year. I believe they withdrew the Edison & Magnolia ratings before things fell apart. Given the absence of any other rating service and Best’s 5 year requirement, I would like to see Demotech get it right and be a useful tool. The state of Florida has certainly been no help.
Or the OIR could do that job since they are the ones responsible for the public trust.
You would think we could depend on the OIR, but I’ll put my faith in Demotech before the current OIR.
You can keep ragging on Demotech or you can accept the fact that they are for real and they assisted in the stabilization of the marketplace when others walked away from Florida.
Also, before we get excited about insurers with Best ratings, keep in mind that 12 to 16 insurers rated by Best went under when Hurricane Andrew blew through Florida. Ask Tom Gallagher, he had to liquidate them! As a result of Best’s terrible track record with Andrew, today, Best’s rating requirements are, considered by some, arbitrary and self-serving.
Also, regarding Demotech, a study prepared by 3 Florida State University PhDs indicated that – countrywide – Demotech rates more insurance companies than Moodys, Fitch and Standard and Poors’ combined.
We would not have a Florida property insurance market without Demotech.
Is there a Florida property insurance market? Or is there a house of cards not too dissimilar from the AIG swaps? A company goes from about $500,000 in premium to $95million in premium in three years, and no one bats an eye? A commendation from a magazine like INC. for a small start up insurer should be a sign of impending doom, not something to celebrate. Too much growth, too fast, and thank the gods of weather the wind didn’t blow in Florida the past few years.
Florida doesn’t have a market. It has a collection of highly leveraged bets strung together on a chain of politicians’ lies to the voters. When the wind again, blows, please don’t burden my insurance or my federal taxes with your sorry cries for guaranty funds or federal bailouts.
I’m not slamming Demotech, and there’s no question they perform an essential service for the FL property insurance market. My complaint is the use of the A rating for brand-new companies. I would like something where the consumer would be better alerted to the tenure of the company. Maybe something like A0 for the first year of business, A1 for the second, A2 for the third, etc. Once five years old, you could drop the number from the rating.
I remember when these carriers came into our offices and told us they would get a Best Rating, but they needed to wait 5 years. Not only has that proven to be a lie, but how many more years do we watch First Protective or Sunshine State write at nearly 10 to 1 before someone (including Demotech) cries foul? If they told us they werent getting a Best Rating because the standards are exceptionally high, I might feel better. They all try to fall back on the lie that Best won’t rate new companies or Florida companies while ASI and PUR seem to get it done. Demotech ratings should be like non-admitted. You should need to show affadavits that you simply coulnt get it placed with a Best-rated carrier before using a Demotech company.
I have no crystal ball. As an agent you can request to see reinsurance agreements and balance sheets. Just ask! Carriers who are writing 10 times their surplus in premium, even with reinsurance in play, aren’t likely to be long term players. Additionally, look at the carrier’s appetite for new business. Are they overly conservative, not willing to write anything at all, or are they overly competitive. Either one could spell trouble.
I would guess that most insurance agents want to trust the system and have available markets. Unfortunately the system is not to be trusted. I’d rather have no markets than garbage markets.
There are more than 1,000 single state property insurance companies duly licensed and operating in the US. Many of these smaller, property writers have been around since the 1850s. They are heavily reinsured.
That Florida has several smaller, heavily reinsured carriers is NOT unique to Florida. It happens in every state in the country.
That’s an interesting notion that Florida is not unique. Because I heard that there was not a single state in the country where the Homeowners market share of A-rated Best-rated companies was below 90%. In Florida it’s below 20%. Other states have small companies but they don’t write that much and don’t face the volatility of Florida. The margin for error in Florida is so great that a rating should mean more, not less. Somebody please find a state where non-rated carriers have more than 10% of the market…
Hey, my crystal ball comment was a compliment! I certainly didn’t intend to imply you didn’t work hard to gaze into it.
SWFL agent, I just want my clients to be protected when the wind blows. Northern Capital offered me an appointment back in 2007. I didn’t like what I saw then, and their plan to add additional lines of business and another homeowner’s company didn’t seem to mesh with their surplus position.
That said, I’d really like to be proven wrong about them. I don’t like to see anyone go out of business.
I agree wholeheartedly with Tim’s comments.
A year or two ago, I reviewed the detailed financials of about 30 of the Florida start up companies. All had A ratings from Demotech. Not one had sufficient experience or financial wherewithall to survive a significant Florida hurricane. I’m glad to see Demotech removing their rating from a few of these companies, but I have to conclude from my own review that their rating criteria isn’t sufficient in the first place.
Forget Demotech, for 5 million you can buy an A rating. Check out Weiss Ratings, every D rated company on their list has said goodbye to Florida. They were so right on the money with Poe, Edison, Coral and now Northern Capital.
http://www.weissratings.com
Demotech identified Poe 8 months before Best. Edison is negotiating with another company. Weiss Ratings do not like any company that uses a lot of reinsurance.
Negotiations over, Edison is now owned by Florida Peninsula, done awhile ago now.
The reason why there are so few AM Best rated carriers is because it takes too much capital to write homeowners in FL. To attract investors, carriers need to achieve a 15 – 20% ROC which they can’t do today because of price control which makes it hard to obtain capital. It really is that simple.
And, the fact that the insurer of last resort, State run Citizens Insurance, competes directly with private companies, but does not have to follow the same NAIC/DOI regulations as the private companies suppressing premiums artificially.
I ran into this article doing some research on homeowners. I live in Louisiana. I was doing a price comparison on new insurance. Homewise is giving me a real attractive rate compared to what I have now. I also noticed it did not have an am best rating it had a demotech rating. I don’t want to be stuck with bad insurance if another hurricane comes. What are your thoughts on Homewise?? Any info. would be appreciated.