Florida regulators have approved another reciprocal property insurance company and it has received ratings from two financial rating firms.
Manatee Insurance Exchange, a spinoff from Tampa-based Safepoint Insurance Co., was granted a certificate of authority Feb. 2 by the Florida Office of Insurance Regulation. This week, the Demotech rating firm granted the company a financial strength rating of “A Exceptional.”
KBRA, formerly known as as the Kroll Bond Rating Agency, issued a “BBB” rating with a stable outlook. The slightly less-than-sparkling financial rating was due largely to the fact that Manatee’s entire surplus, initially anyway, is leveraged – with $25 million in notes.
“Furthermore, as a Florida-only writer, primarily focused on homeowners business, the company will have product and geographic concentration, natural catastrophe exposure due to hurricanes, and high reinsurance dependence that, depending on availability and affordability, could materially impact results,” KBRA noted in its rating report. “Lastly, as a new insurer, Manatee’s future profitability is uncertain and dependent upon management executing its business plan.”
But Manatee, offering commercial and personal lines, will also have favorable market conditions, a year after Florida lawmakers approved significant litigation-tamping rules designed to reduce insurers’ lawsuit expenses. It has no legal liabilities and will benefit from a decline in the capacity of the private market, the KBRA report noted.
The carrier also will have “manageable start-up expenses” due to its structure: The exchange will essentially take on Safepoint’s Florida book of business upon renewals, but not the claims.
The manager, known as the attorney-in-fact, will be Safepoint’s parent company, Safepoint Holdings Inc. The Safepoint Managing General Agency will handle policy administration and claims servicing. Acrisure Re will be the broker of record for Manatee’s reinsurance placement.
David Flitman is CEO of Safepoint, which operates in four other Southeastern states. Flitman has more than 20 years in the business, including leadership and actuarial roles, most recently with Flagstone Reassurance Suisse.
As other exchanges’ leaders have said recently, the reciprocal model has proven to be more attractive for investors in hurricane-swept markets like Florida and Louisiana, partly because policyholders, as subscribers, pay an extra 10% on their premiums to help build the surplus.
“The subscriber surplus contributions provide a predictable mechanism to quickly grow surplus capital to continually reinforce the financial buffer necessary for a carrier to cover losses or purchase reinsurance year after year in catastrophe-prone areas,” Safepoint said in a news release Tuesday.
Safepoint executives have some experience with the exchange model. The insurer launched Cajun Underwriters Reciprocal Exchange in Louisiana in 2022 and has enjoyed success with that, said Rocky Russell, director of investor relations at Safepoint.
“There are some advantages for us with exchanges, and yes, they are popular now,” he noted.
Manatee is the latest reciprocal/exchange insurer to enter the Florida market, following recent announcements from Condo Owners Reciprocal Exchange, launched by HCI Group; Orange Insurance Exchange; Loggerhead Reciprocal Interinsurance Exchange; and others.
Safepoint has been in the Florida market for 10 years and has about 84,000 policies in force in the state. The company last fall was approved to take out up to 46,000 policies from the state-created Citizens Property Insurance Corp. Safepoint will ultimately shrink its personal lines presence in Florida while expanding in other states, Russell said. Manatee will initially focus on all lines in Florida and excess and surplus products in other states, he added.
“Safepoint plans to work closely with its network of independent agents and current policy holders to renew existing business with Manatee, and posture Safepoint Insurance Co. for new ventures in other markets,” the press release noted.
The transition will begin this spring.
Top photo: Adobe Stock images
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