Jeffrey Wade
Florida's insurance market has been in crisis, with insurance companies leaving the state, going out of business, or choosing not to renew policies in high-risk areas. In 2023, Farmers Insurance stopped writing policies in Florida, and Frontline Insurance Group, parent to two significant property insurers in Florida, had its financial rating stability withdrawn by Demotech, the state's primary financial rating firm. This caused panic in the already shaky Florida insurance market, with 27 of Florida's property insurance companies potentially facing a financial rating downgrade. Frontline Insurance is still listed as active in Florida, but it is unclear if this will change in the future.
| Characteristics | Values |
|---|---|
| Is Frontline Insurance leaving Florida? | No, Frontline Insurance is still active in Florida as of July 2023. |
| Financial rating stability | Frontline Insurance Group's financial rating stability was withdrawn by Demotech in January 2023. |
| Demotech rating discontinuation reason | Not based on the insurers' financial condition, according to Demotech leadership. |
| KBRA rating | Frontline received a "BBB+" rating from KBRA in December 2022. |
| Outlook | The outlook for Frontline Insurance was marked as "stable" by KBRA. |
| Net income | $2 million for the first six months of 2022, according to AM Best. |
| Policyholder surplus | $30 million to $34 million for much of 2021 and 2022, according to AM Best. |
| Combined ratio | Improved steadily in recent months, according to AM Best. |
| Demotech rating (past) | "A Exceptional" in August 2022. |
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What You'll Learn
Frontline Insurance Group's financial rating stability withdrawn by Demotech
On January 5, 2023, Demotech, a financial analysis firm, announced that it had withdrawn Frontline Insurance Group's financial stability rating. Frontline Insurance Group is the parent company of two significant property insurers in Florida: Frontline Insurance Unlimited Co. and First Protective Insurance Co. The withdrawal of the rating was a decision made by Demotech and was not based on the insurers' financial condition, according to the firm.
In the lead-up to this decision, Frontline reported just $2 million in net income for the first six months of 2022, following a slight loss in 2021. Despite this, Frontline maintained a policyholder surplus of $30 million to $34 million for much of 2021 and 2022, and its combined ratio, a measure of profitability, had been improving. As recently as August 2022, Demotech had granted Frontline an "A Exceptional" rating.
Company officials from Frontline stated that the insurers had voluntarily withdrawn their rating requests and ended their association with Demotech due to dissatisfaction with the rating process. Demotech's decision to withdraw the rating sparked concerns among Florida insurance agents and homeowners' associations, as rating withdrawals have often signaled financial trouble for Florida insurance carriers. Additionally, Frontline Insurance Unlimited is a surplus lines carrier, which means it is subject to fewer Florida insurance rules than admitted carriers. In the event of insolvency, state regulators may have limited authority to require the return of unearned premiums.
Following the withdrawal of Demotech's rating, Frontline Insurance Unlimited Co. and First Protective Insurance Co. were rated by KBRA, the former Kroll Bond Rating Agency. KBRA assigned the carriers a BBB+ rating in December 2022, with a stable outlook. While KBRA acknowledged the companies' recent net losses, they viewed their near-term financial results positively due to strong underwriting and claims handling. However, it is important to note that Freddie Mac does not accept insurance carrier ratings from KBRA.
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Demotech's withdrawal not based on insurers' financial condition
Demotech, a financial analysis firm, has withdrawn the Financial Stability Ratings® (FSRs) of Frontline Insurance Unlimited Company and its sister company, First Protective Insurance Co. Frontline Insurance Group is the parent company of two significant property insurers in Florida. However, Demotech's leadership has stated that the withdrawal was not based on the insurers' financial condition. Instead, it was a commercial decision, and Demotech no longer follows or reviews the companies.
Demotech specializes in evaluating the financial stability of regional and specialty insurers in the US. The firm has been serving the insurance industry since 1985 and has a philosophy of reviewing insurers based on their area of focus and business model execution rather than solely on financial size.
Frontline Insurance Group has expressed dissatisfaction with the Demotech rating process, which may have contributed to their decision to voluntarily withdraw their rating requests and end their association with Demotech. Despite this, Frontline Insurance has maintained a stable financial position. According to AM Best financial information posted by the Florida Association of Insurance Agents, Frontline reported a slight loss for 2021 but has since improved, reporting $2 million in net income for the first six months of 2022.
In December 2022, Frontline Insurance Unlimited Co. and First Protective Insurance Co. received a "BBB+" rating from KBRA, formerly known as the Kroll Bond Rating Agency. KBRA marked the outlook for the companies as "stable." This new rating indicates that Frontline Insurance is still a reliable and financially stable company, despite the withdrawal of Demotech's ratings.
It is important to note that Demotech's withdrawal of ratings is not an indication of Frontline Insurance's financial instability or a cause for concern for policyholders in Florida. The company continues to maintain its financial strength and commitment to serving homeowners and business owners in the state.
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Frontline's net income and policyholder surplus
Frontline Insurance Group, the parent company of two significant property insurers in Florida, has experienced fluctuations in its financial performance in recent years. According to AM Best financial information posted by the Florida Association of Insurance Agents, Frontline reported a net income of just $2 million for the first six months of 2022, following a slight loss in 2021. Despite this, Frontline maintained a healthy policyholder surplus of $30 million to $34 million throughout 2021 and 2022, indicating a strong financial position.
The company's combined ratio, a key measure of profitability in the insurance industry, has shown steady improvement over the past several months. This improvement suggests that Frontline's financial health may be on an upward trajectory. As of August 2022, Demotech, a rating firm, granted Frontline an "A Exceptional" rating, reflecting the company's strong business model and financial strength.
However, in January 2023, Demotech made the decision to withdraw its financial rating stability for Frontline Insurance Group. This move was not due to the company's financial condition, according to Demotech leadership. Frontline corporate leaders did not publicly comment on the matter. Still, company officials indicated that the insurers had voluntarily withdrawn their rating requests due to dissatisfaction with the Demotech rating process.
Despite the withdrawal of Demotech's rating, Frontline Insurance Group's outlook remains stable. The company and its sister company, First Protective Insurance Co., received a ""BBB+" rating from KBRA (formerly known as the Kroll Bond Rating Agency). This rating indicates that Frontline continues to demonstrate financial stability and a strong presence in the Florida insurance market.
As of July 2023, Frontline Insurance is still listed as an active insurance company in Florida by the Florida Officer of Insurance Regulation. This indicates that Frontline has not exited the state, and continues to serve homeowners and commercial property owners in the state.
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KBRA's rating of Frontline Insurance Group
Frontline Insurance Group, which is comprised of First Protective Insurance Company and Frontline Insurance Unlimited Company, has received a rating of BBB+ from the Kroll Bond Rating Agency (KBRA). This rating reflects Frontline's experienced management team, financial flexibility, solid reinsurance program, and strong local market presence. KBRA's acceptance of Frontline's rating is a result of the company's growth and enhanced geographical footprint, allowing Frontline's insurance products to be universally accepted by all lenders and mortgage companies.
In contrast, Demotech, another rating firm, had withdrawn Frontline's financial rating stability. This decision was made in the wake of Frontline's dissatisfaction with the Demotech rating process, and not because of the company's financial condition, according to Demotech leadership. Despite this setback, Frontline has continued to serve its customers for over 25 years, offering home and commercial property insurance tailored to meet their unique needs.
The withdrawal of Frontline's rating by Demotech set off alarm bells among Florida insurance agents and homeowners' associations. This is because Frontline Insurance Unlimited is a surplus lines carrier, subject to fewer Florida insurance rules than admitted carriers. In the event of insolvency, state regulators may have limited authority to protect policyholders.
Customer reviews of Frontline Insurance are mixed. While some customers praise the company for its professional service and good rates, others have complained about problematic policy changes, aggressive claims handling, and poor customer service. Overall, Frontline Insurance Group's rating by KBRA reflects the company's financial strength and stability, which has been recognized by lenders and mortgage companies.
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Florida's insurance crisis
Florida is facing an insurance crisis, with rising premiums, an increasing number of uninsured homeowners, and a growing number of insurance companies leaving the state.
The crisis has been building for some time, with Florida's 2004 hurricane season and Hurricane Ian in 2023 causing particular devastation. In the aftermath of these events, many private insurers went bankrupt or left the state, leading to the creation of Citizens, a state-run company acting as a "last resort" for those unable to obtain insurance through traditional means. Citizens, however, has also faced challenges, with affordability issues and a high rate of claim denials.
The state's insurance market has also been impacted by the withdrawal of Frontline Insurance Group's financial rating stability by the Demotech rating firm. While Frontline officials attributed the withdrawal to dissatisfaction with the Demotech rating process, it has nonetheless contributed to the uncertainty in the market.
The situation has been further exacerbated by insurance companies abandoning high-risk regions due to the potential for storm damage. As a result, many Florida homeowners have been forced to seek alternative insurance providers or go without insurance altogether. According to Divya Sangam, an insurance expert, approximately 20% of Florida homeowners have opted to self-insure, which means they are uninsured. This trend is particularly prominent in Central Florida, where homeowners are forgoing insurance due to high costs and reduced coverage.
In an effort to curb insurance costs, Florida lawmakers have implemented measures to reduce lawsuits against insurance companies. However, these laws have made it difficult for homeowners to take legal action against their insurance companies, even when valid grounds exist. As a result, insurance payouts have often fallen short of expectations, leaving residents struggling to rebuild their lives.
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Frequently asked questions
No, Frontline Insurance is not leaving Florida. However, it has had its financial rating stability withdrawn by the Demotech rating firm.
Demotech's withdrawal of Frontline Insurance's rating was due to dissatisfaction with the rating process. Demotech's decision was not based on the financial condition of the insurers.
The withdrawal of Frontline Insurance's rating by Demotech may have caused concern among homeowners, as financial ratings help homeowners feel confident in the financial strength of insurance companies.
Yes, several insurance companies have left Florida or reduced their exposure, including Farmers, Progressive, and AAA. This is due to factors such as hurricanes, litigation, and financial instability.
The departure of insurance companies from Florida has resulted in higher rates and reduced coverage options for homeowners. It has also led to the entry of new insurance companies into the market, offering more choices for consumers.
