OLDWICK, NJ–(BUSINESS WIRE)–AM Best lowered the long-term issuer credit ratings (long-term ICR) from “bbb” (good) to “bbb+” (good) and affirmed Florida Family Insurance’s financial strength rating (FSR) of B++ (good) Company and its subsidiary, Florida Family Home Insurance Company, which together constitute the two pool members of Florida Family Group (Florida Family). The FSR outlook has been revised from stable to negative, while the long-term ICR outlook is negative. Both companies are domiciled in Bonita Springs, Florida.
The credit ratings (ratings) reflect Florida Family’s balance sheet strength, which AM Best assesses as adequate, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The deterioration in long-term ICRs reflects AM Best’s concerns about Florida Family’s balance sheet strength following the continued erosion of surpluses due to underwriting losses, significantly elevated underwriting leverage metrics, inconsistent development of reserves and a downward trend in risk-adjusted capitalization, as measured by Best’s capital adequacy ratio (BCAR). The deterioration in BCAR and the risk-adjusted capitalization view reflect higher gross probable maximum losses (PML) which are the product of the group’s expansion of its new product for owners, combined with reinsurance coverage against lesser catastrophes, which collectively translate into higher net PMLs across the Value-at-Risk intervals. Heavy reliance on reinsurance and above-average net debt put additional pressure on balance sheet strength, relative to the personal property composite.
The negative rating outlook reflects Florida Family’s underwriting performance, which was negatively impacted by weather-related events, a challenging insurance market in Florida, which includes increases in claims frequency and severity. related to water, and more recently, the development of reserves for adverse losses. Management has implemented a number of actions to improve performance, including rate increases, non-renewal of undesirable risks, closure of new business in specific areas of Florida, and effective management of security issues. allocation of benefits. The group recently launched a new home insurance product, which has produced modest growth in historical footprint and additional underwriting in territories previously closed to wind business. The business profile rating reflects Florida Family’s limited operating territory in a hurricane-prone state. Severe weather continues to be Florida Family’s top risk, which is a focus of the group’s ERM program.
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