Florida OKs Allstate’s Castle Key Rate Increases

Florida regulators have approved a statewide average rate increase of 14.9 percent for Allstate ‘s Florida unit, Castle Key Insurance Co. The change will apply to Castle Key’s existing homeowners, renters and condominium policies.

Also, Castle Key Indemnity Co. received approval for a statewide average 8.2 percent increase that will apply to homeowners and renters.

The two Allstate stand-alone subsidiaries only write coverage in Florida, where together they insure 240,000 homeowners, renters and condominium owners.

The rate increases are lower than initially filed with regulators. Castle Key requested a statewide average 32.7 percent increase while Castle Key Indemnity filed for a 21.9 percent increase.

At a public hearing in April, Castle Key executives said that the rate increases are needed because significant underwriting losses have reduced the insurers’ surplus. They said the two insurers combined lost $217 million between 2007 and 2011, which had the effect of reducing their surplus from $206 million to $117 million.

Regulators, however, questioned the need for the higher rates based on several factors including agents commissions since the insurers are no longer writing new business.

That rate increases come as the financial rating firm A.M Best released a report setting Castle Key Group’s financial strength rating at B-minus and issuer credit ratings at bb-minus. The ratings reflect unprofitable operating performance, exposure to hurricanes, and significant reliance on the Florida Hurricane Catastrophe Fund for reinsurance.