Joseph L. Petrelli Demotech, Inc. Columbus, Ohio.
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Transcript of Joseph L. Petrelli Demotech, Inc. Columbus, Ohio.
Macquarie Capital (USA) Inc.Bermuda in BostonSeptember 23, 2014
Biggest Challenges and Headwinds Facing the Industry
Joseph L. PetrelliDemotech, Inc.Columbus, Ohio
Demotech, Inc. will become the leading provider of innovative solutions to financial analysis issues by focusing our resources on niches presenting opportunity for corporate growth.
Mission Statement
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Demotech, Inc. is a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers. Since 1985, Demotech has served the insurance industry by assigning accurate, reliable and proven Financial Stability Ratings® (FSRs) for Property & Casualty insurers and Title underwriters. FSRs are a leading indicator of financial stability, providing an objective baseline of the future solvency of an insurer.
Demotech's philosophy is to review and evaluate insurers based on their area of focus and execution of their business model rather than solely on financial size. This philosophy was the catalyst for the Demotech Company Classification System to stratify and categorize insurers by broad operational categories.
An Introduction to Demotech, Inc.
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Florida and Bermuda
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How interest yield environment Highly volatile economic conditions – next bubble? Labor participation rate at or near historic low Homeownership rate has crept up but tenuous Global government spending has done little to invigorate economies Capital on the sidelines is getting antsy Political unrest
National and Global Challenges
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Florida Homeowners Marketshare 1995 Top 10
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CompanyPremium Written
1995% of Total Premium Earned 1995
Loss Incurred 1995
DCC Incurred 1995
State Farm Fire and Casualty Co 504,823,127 30.0% 474,813,735 264,759,435 15,222,703
Allstate Insurance Company 279,704,546 16.6% 279,011,695 158,277,172 6,152,416
Nationwide Mutual Fire Insurance Co 78,843,286 4.7% 71,932,398 56,600,744 1,263,833
United Serv Automobile Assn 68,428,873 4.1% 64,296,071 74,122,137 6,408,625
LM Property and Casualty Ins. Co. 35,081,722 2.1% 34,917,162 5,286,781 1,643,212
Standard Fire Insurance Co 33,479,098 2.0% 29,227,231 14,666,200 705,347
Metropolitan Property & Cas Ins Co 30,481,823 1.8% 22,422,426 10,005,637 230,121
Automobile Ins Co of Hartford CT 28,679,065 1.7% 25,193,068 14,613,745 477,667
Liberty Mutual Fire Insurance 28,241,781 1.7% 26,064,423 13,196,523 352,134
Florida Farm Bureau General Ins Co 23,155,863 1.4% 20,599,639 15,695,697 62,447
Top 10 Total 1,110,919,184 65.9% 1,048,477,848 627,224,071 32,518,505
CompanyPremium Written
1995% of Total Premium Earned 1995 Loss Incurred 1995 DCC Incurred 1995
Federal Insurance Company 22,936,310 1.4% 21,942,547 10,313,733 965,904
Auto Owners Ins Co 22,742,136 1.3% 21,442,796 13,097,842 1,101,356
USAA Casualty Insurance Co 22,701,544 1.3% 20,682,321 15,908,821 847,372
Travelers Indemnity Company 22,321,060 1.3% 19,210,987 10,010,259 700,832
Government Employees Insurance Co 21,203,910 1.3% 21,450,590 12,710,184 810,993
Hartford Insurance Co of The Midwest 21,025,107 1.2% 19,548,122 10,912,815 439,786
State Farm General Insurance Co 18,895,207 1.1% 18,816,099 11,709,711 45,782
Florida Farm Bureau Casualty Ins Co 18,578,858 1.1% 16,320,282 10,380,361 255,991
Firemans Fund Insurance Co 17,663,992 1.0% 15,542,383 9,414,109 648,828
Phoenix Insurance Company 17,477,117 1.0% 16,812,633 10,355,727 329,131
11-20 Total 205,545,241 12.2% 191,768,760 114,813,562 6,145,975
Florida Homeowners Marketshare 1995 Top 11-20
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CompanyPremium Written
2000% of Total Premium Earned 2000
Loss Incurred 2000
DCC Incurred 2000
State Farm Florida Insurance Co 583,296,400 20.1% 556,952,383 243,081,644 12,540,580
Castle Key Ins Co 312,825,277 10.8% 309,946,075 68,452,480 3,257,969
Clarendon National Insurance Co 158,386,180 5.4% 160,101,577 47,223,948 6,628,920
Clarendon Select Insurance Co 133,975,289 4.6% 133,805,350 34,145,237 4,809,255
United Serv Automobile Assn 104,630,465 3.6% 101,758,648 28,304,629 1,303,005
Nationwide Insurance Co of Florida 74,849,983 2.6% 19,338,331 6,162,260 184,418
First Floridian Auto & Home Ins Co 71,289,644 2.5% 67,653,591 26,774,549 1,228,290
Nationwide Mutual Fire Insurance Co 60,424,757 2.1% 108,096,734 36,432,481 1,637,400
Federal Insurance Company 57,490,362 2.0% 50,946,301 19,784,263 1,670,463
Florida Select Insurance Company 51,366,669 1.8% 47,787,116 14,798,820 -61,220
Top 10 Total 1,608,535,026 55.3% 1,556,386,106 525,160,311 33,199,080
Florida Homeowners Marketshare 2000 Top 10
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CompanyPremium Written
2000% of Total
Premium Earned 2000
Loss Incurred 2000
DCC Incurred 2000
USAA Casualty Insurance Co 47,457,806 1.6% 44,679,716 10,307,426 305,708
Liberty Mutual Fire Insurance 47,210,221 1.6% 46,391,346 17,822,455 417,053
Tower Hill Preferred Ins Co 40,508,706 1.4% 38,990,205 8,181,954 359,340
Hartford Insurance Co of The Midwest 40,180,606 1.4% 39,315,969 11,914,716 479,763
Harbor Specialty Insurance Company 37,914,874 1.3% 37,485,431 9,590,473 593,285
LM Property and Casualty Ins. Co. 34,094,066 1.2% 35,259,815 11,360,405 219,014
American Superior Ins Co 33,911,175 1.2% 32,480,493 9,881,506 1,428,880
Southern Family Insurance Company 32,975,831 1.1% 34,397,903 11,465,152 -47,603
Qualsure Ins Corp 32,749,248 1.1% 11,716,264 2,390,118 35,246
Omega Insurance Company 32,637,708 1.1% 31,760,586 8,972,537 1,212,257
11-20 Total 379,640,241 13.1% 352,477,728 101,886,742 5,002,943
Florida Homeowners Marketshare 2000 Top 11-20
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CompanyPremium Written
2005% of Total
Premium Earned 2005
Loss Incurred 2005DCC Incurred
2005
State Farm Florida Insurance Co 1,175,848,939 19.3% 1,097,835,372 1,274,636,062 17,177,314
Citizens Prop Ins Corp 511,493,021 8.4% 515,156,045 620,972,059 22,383,248
Castle Key Ins Co 375,827,109 6.2% 370,083,519 416,521,583 -3,341,000
Nationwide Insurance Co of Florida 269,152,615 4.4% 248,030,218 334,928,058 9,008,375
Atlantic Preferred Insurance Co 197,126,519 3.2% 168,833,022 629,445,421 808,332
Florida Preferred Prop Ins Co 173,427,646 2.8% 140,002,056 421,768,345 425,944
United Serv Automobile Assn 157,367,104 2.6% 151,156,840 249,340,935 951,847
Liberty Mutual Fire Insurance 138,817,360 2.3% 123,634,303 114,668,584 2,289,825
First Floridian Auto & Home Ins Co 120,498,302 2.0% 105,032,065 106,752,653 4,783,932
Geovera Specialty Ins Co 111,695,287 1.8% 88,455,468 126,369,841 17,851,033
Top 10 Total 3,231,253,902 52.9% 3,008,218,908 4,295,403,541 72,338,850
Florida Homeowners Marketshare 2005 Top 10
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CompanyPremium Written
2005% of Total
Premium Earned 2005
Loss Incurred 2005DCC Incurred
2005
Federal Insurance Company 110,634,180 1.8% 101,749,514 35,361,442 1,209,338
United Prop & Cas Ins Co 104,978,215 1.7% 82,416,156 220,994,558 1,891,269
Castle Key Ind Co 99,239,939 1.6% 99,972,246 4,195,957 1,566,237
USAA Casualty Insurance Co 96,577,252 1.6% 91,172,848 127,892,595 939,464
Tower Hill Preferred Ins Co 96,293,790 1.6% 84,830,989 173,283,859 1,889,115
Clarendon Select Insurance Co 94,207,388 1.5% 111,729,976 355,631,346 -3,455,095
Gulfstream Prop & Cas Ins Co 93,418,769 1.5% 31,969,242 116,485,028 488,702
American Strategic Insurance Co 85,747,547 1.4% 87,791,515 47,538,023 1,640,063
Tower Hill Prime Insurance Company 83,639,919 1.4% 61,726,607 77,743,153 842,160
Universal Ins Co of NA 81,510,111 1.3% 43,798,173 71,190,689 662,906
11-20 Total 946,247,110 15.5% 797,157,266 1,230,316,650 7,674,159
Florida Homeowners Marketshare 2005 Top 11-20
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CompanyPremium Written
2010% of Total
Premium Earned 2010
Loss Incurred 2010 DCC Incurred 2010
Citizens Prop Ins Corp 1,156,647,315 15.3% 965,072,025 436,092,444 28,888,968
State Farm Florida Insurance Co 980,590,404 13.0% 994,185,248 398,327,276 51,390,548
Universal Property & Casualty Ins 603,334,906 8.0% 557,600,093 159,003,198 14,302,318
St Johns Ins Co Inc 248,124,870 3.3% 259,300,270 71,657,092 6,145,175
United Serv Automobile Assn 221,075,163 2.9% 218,358,777 58,759,762 1,591,624
Florida Peninsula Ins Co 179,228,009 2.4% 180,108,919 58,874,976 7,761,861
Royal Palm Ins Co 147,859,244 2.0% 149,290,461 74,974,441 5,614,930
Federal Insurance Company 138,344,759 1.8% 139,172,213 31,680,608 749,432
American Home Assurance Company 137,667,154 1.8% 141,528,306 24,722,040 1,185,570
Castle Key Ins Co 135,302,913 1.8% 135,703,630 39,043,779 2,387,945
Top 10 Total 3,948,174,737 52.2% 3,740,319,942 1,353,135,616 120,018,371
Florida Homeowners Marketshare 2010 Top 10
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CompanyPremium Written
2010% of Total
Premium Earned 2010
Loss Incurred 2010 DCC Incurred 2010
United Prop & Cas Ins Co 135,192,152 1.8% 134,463,241 46,259,337 6,461,956
Homewise Ins Co 128,332,164 1.7% 90,074,371 23,415,054 138,102
USAA Casualty Insurance Co 127,838,148 1.7% 127,895,239 27,750,032 1,719,382
Security First Ins Co 127,204,125 1.7% 112,681,814 34,011,914 3,040,452
Liberty Mutual Fire Insurance 123,102,196 1.6% 131,772,177 117,776,009 6,824,017
Tower Hill Prime Insurance Company 119,008,976 1.6% 103,263,952 34,211,394 3,140,489
Homeowners Choice Prop & Cas Ins Co 116,063,121 1.5% 106,084,544 28,458,504 2,736,765
Tower Hill Preferred Ins Co 111,877,610 1.5% 103,373,462 46,498,365 3,858,459
Universal Ins Co of NA 104,973,010 1.4% 110,553,936 57,284,084 5,755,389
Castle Key Ind Co 96,271,718 1.3% 64,979,805 15,262,167 1,557,612
11-20 Total 1,189,863,220 15.7% 1,085,142,541 430,926,860 35,232,623
Florida Homeowners Marketshare 2010 Top 11-20
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Company Premium Written 2013 % of TotalPremium Earned
2013Loss Incurred 2013
DCC Incurred 2013
Citizens Property Ins Corp. 1,272,335,759 14.5% 1,445,423,995 388,109,714 116,650,999
Universal P&C Insurance Co. 684,379,171 7.8% 695,475,896 141,630,309 15,518,512
State Farm Florida Ins Co. 646,850,723 7.4% 696,037,459 136,310,936 16,653,060
Homeowners Choice P&C Ins Co. 311,550,298 3.6% 271,635,447 45,609,634 2,605,103
Florida Peninsula Insurance Co 310,352,524 3.5% 281,285,300 60,317,347 9,694,585
United Services Automobile 277,431,545 3.2% 264,931,482 57,644,426 1,923,173
United P&C Insurance Co. 263,178,022 3.0% 237,133,881 64,272,690 2,618,554
St. Johns Insurance Co. 255,851,881 2.9% 255,366,419 61,309,982 5,368,990
Federated National Ins Co. 220,639,653 2.5% 153,291,687 40,820,907 7,078,663
People's Trust Insurance Co. 203,009,802 2.3% 118,908,475 30,468,275 4,434,572
Top 10 Total 4,445,579,378 50.7% 4,419,490,041 1,026,494,220 182,546,211
Florida Homeowners Marketshare 2013 Top 10
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CompanyPremium Written
2013% of Total
Premium Earned 2013
Loss Incurred 2013
DCC Incurred 2013
Security First Insurance Co. 184,487,897 2.1% 187,343,098 39,968,046 10,791,776
Tower Hill Prime Insurance Co. 179,732,931 2.1% 171,250,254 52,238,308 4,032,669
Federal Insurance Co. 162,155,667 1.8% 155,495,792 37,098,378 1,051,901
USAA Casualty Insurance Co. 147,191,648 1.7% 143,249,637 30,450,826 967,332
Amer Integrity Ins Co. of FL 141,915,923 1.6% 120,613,757 24,523,951 2,627,889
Castle Key Insurance Co. 134,209,691 1.5% 134,392,271 32,680,296 2,686,548
Tower Hill Preferred Ins Co. 132,209,409 1.5% 130,084,833 34,895,330 2,955,385
Tower Hill Select Insurance Co 121,368,000 1.4% 107,518,089 32,892,421 3,360,517
AIG Property Casualty Co. 121,279,021 1.4% 116,121,960 31,847,927 1,797,177
Heritage P&C Insurance Co. 120,622,904 1.4% 47,243,382 12,339,086 1,663,929
11-20 Total 1,445,173,091 16.5% 1,313,313,073 328,934,569 31,935,123
Florida Homeowners Marketshare 2013 Top 11-20
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1995 2000 2005 2010 2013
Top 10 65.9% 55.3% 52.9% 52.2% 50.7%
11-20 12.2% 13.1% 15.5% 15.7% 16.5%
All other total 21.9% 31.6% 31.6% 32.1% 32.8%
Total 100.0% 100.0% 100.0% 100.0% 100.0%
Florida Homeowners Marketshare Comparison
16
The structure of Citizens Property Insurance Company makes it a fierce competitor for businesses despite the clearinghouse effort.
2014 estimated direct premium written of $2.42 billion Assessable
Private sector must compete with a huge competitor that is not bound by the terms, conditions and realities that the private sector must address. The competitor has the ability to assess to resolve under-funding and also purchases less reinsurance than a comparable private sector carrier.
Risks Facing Florida
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Prior legislation mandated that any major structure for which a permit is applied on or after July 1, 2014, for new construction or substantial improvement, is not eligible for coverage by the corporation if the structure is seaward of the coastal construction control line or is within the Coastal Barrier Resources System.
House Bill 1089 changed the effective date for permits from July 1, 2014 to July 1, 2015.
Coastal Construction Control Line (Personal & Commercial Lines)
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Senate Bill 708 states the following: For residential property insurance, if a policy or
contract has been in effect for more than 90 days, a claim filed by the insured cannot be denied based on credit information available in public records.
After a policy or contract has been in effect for more than 90 days, the insurer may not cancel or terminate the policy or contract based on credit information available in public records.
Adverse Action Based on Publicly Available Credit Information
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Senate Bill 1672 provides that a mitigation form provided to the Corporation is not subject to independent verification or reinspection, absent material changes to the structure, if the form was signed by an authorized mitigation inspector and reviewed by and verified by a quality assurance program approved by the Corporation.
Citizens’ current practices will be updated to reflect any impact from this provision.
Exemption of Reinspection for Authorized Mitigation Inspectors
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House Bill 1089 mandates that commercial residential condominiums shall be deemed ineligible for coverage if 50 percent or more of the units are rented more than eight times in a calendar year for a rental agreement period of less than 30 days.
This legislation requires changes to Commercial Residential Wind Only eligibility from the current transient standard of more than three (3) rentals per year for periods less than thirty (30) days, or held out to the public as a place regularly rented out to guests for periods of less than thirty (30) days, to the new standard described above. The legislation applies only to commercial residential condominiums.
Commercial Residential Wind Transient Occupancy Eligibility
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Senate Bill 1672 requires changes to Citizens coastal account eligibility to state that the corporation shall cease offering new commercial residential policies providing multi-peril coverage for risks located in the wind-only eligible area and shall instead continue to offer commercial residential wind-only policies. This change applies only to new business and specifically states that the corporation may continue to renew existing policies in force as of July 1, 2014.
This change does not affect current eligibility for ex-wind policies written in the commercial lines account.
Commercial Residential Multi-Peril Eligibility
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Rick Scott
Florida Governor, 2011-present
Political Risk
23
Charlie Crist
Florida Governor, 2007-2011
The Florida Homeowners insurance marketplace has been a laboratory for experimentation. The focus on Citizens and the Cat Fund as insurers sponsored by government has prevented some from viewing the finely toned tools that Florida focused carriers have developed:
◦ Home Hardening
◦ Wind Mitigation
◦ Enhanced catastrophe modeling
◦ Sophisticated underwriting
◦ Arcane pricing models at the catastrophe level
◦ Holistic business models such as People’s Trust Insurance Company
◦ Catastrophe response protocols
◦ Alternatives to reinsurance
◦ Emergence of Demotech as a viable rating alternative (FSU Study and 25 year track record)
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