The Demotech rating firm has withdrawn the financial stability rating for another Florida-admitted insurer, Lighthouse Property Insurance. It’s an ominous sign for the company and for Florida’s deteriorating property insurance market.
“Despite a substantial capital contribution in the fourth quarter 2021, the operating loss in 2021, which reflected the evaluation of losses and loss adjustment expenses associated with Hurricane Ida, resulted in a level of capitalization below what was needed to sustain FSRs at the A level,” Demotech President Joe Petrelli said in a statement Monday.
The withdrawal comes six weeks after Lighthouse announced it would stop writing new policies in Florida as it tries to manage an increase in reinsurance costs. Sources said those costs, along with Louisiana losses from Hurricane Ida last year, may have led to the company’s current financial situation.
The carrier had 13,200 policies in force in Florida at the end of 2021, according to the Florida Office of Insurance Regulation. Besides Florida and Louisiana, Lighthouse also is admitted in North Carolina, South Carolina and Texas and had 170,000 homes insured in all five states in 2020. That year, it reported $56 million in surplus. But by the third quarter 2021, the policyholder surplus was just under $19 million, Demotech reported.
Lighthouse was founded in 2008 in Louisiana and has its Florida offices in Tampa. Company officials declined to comment on the rate withdrawal.
Lighthouse Property’s previous rating was “A, exceptional,” according to the insurer’s website. Demotech this week also withdrew its rating for a sister company, Lighthouse Excalibur Insurance, which was formed when Lighthouse acquired Louisiana-based Excalibur National Insurance Co. in 2019.
Company officials could not be reached for comment Tuesday, and it’s uncertain what the next step will be or if Lighthouse will avoid insolvency. Two other companies that suspended new business in Florida and lost their Demotech ratings this year, St. Johns Insurance and Avatar Property & Casualty Insurance, were deemed insolvent by Florida regulators less than two weeks later.
Five Florida property insurers have been placed into liquidation in the last three years. Six carriers have suspended new homeowners writing in Florida in the last six months, and one has stopped renewing thousands of policies.
Lighthouse’s difficulties underscore how rapidly things can change in Florida’s distressed market. Lighthouse entered Florida in 2020 when it acquired Prepared Insurance Co. In December of 2021, the parent company signaled that it raised $65 million in capital to refinance debt and to fuel company growth.
By the end of the fourth quarter, Lighthouse had $25.4 million in total premium written in Florida, according to the OIR’s supplemental quarterly report. That was a significant drop from the previous quarter, when Lighthouse reported almost 19,000 policies and $38 million in total premium. At the end of 2021, it had $5.4 billion in exposure for policies that include wind coverage.
The company this year has filed for Florida rate increases based partly on its reinsurance needs.
Lighthouse for two years was led by David Howard, who left the company last year to become president of the startup Vyrd Insurance Co., one of the few new companies to enter the Florida market in several years. Patrick White is listed as the current CEO and president of Lighthouse Property Insurance.
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