Ratings firm Demotech has withdrawn the financial stability rating of another Florida-listed insurer, Lighthouse Property Insurance. This is a bad sign for the company and for the deteriorating property insurance market in Florida.
“Despite a substantial capital contribution in the fourth quarter of 2021, the operating loss in 2021, which reflected the assessment of losses and loss adjustment costs associated with Hurricane Ida, resulted in a lower level of capitalization than this which was necessary to keep FSRs at Level A,” Demotech President Joe Petrelli said in a statement Monday.
The withdrawal comes six weeks after Lighthouse announced it would stop underwriting new policies in Florida as it tries to manage rising reinsurance costs. Sources said those costs, along with losses in Louisiana 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 is also admitted in North Carolina, South Carolina and Texas and had 170,000 homes insured in the five states in 2020. That year, it reported a surplus of 56 million dollars. But in the third quarter of 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, outstanding,” according to the insurer’s website. Demotech also withdrew its rating this week 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 on Tuesday, and it is unclear what the next step will be or whether 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 gone into liquidation in the past three years. Six carriers have suspended writing new owners in Florida in the past six months, and one has stopped renewing thousands of policies.
Lighthouse’s struggles underscore how quickly things can change in Florida’s struggling market. Lighthouse entered Florida in 2020 when it acquired Prepared Insurance Co. In December 2021, the parent company reported that it had raised $65 million in capital to refinance debt and fuel business growth.
At the end of the fourth quarter, Lighthouse had $25.4 million in total written premiums in Florida, according to the OIR Supplemental Quarterly Report. This was a significant drop from the previous quarter, when Lighthouse announced nearly 19,000 policies and $38 million in total premiums. At the end of 2021, it had $5.4 billion in exposure for policies that include wind coverage.
This year, the company filed for a rate increase in Florida based in part on its reinsurance needs.
Lighthouse was led for two years by David Howard, who left the company last year to become president of startup Vyrd Insurance Co., one of the few new companies to enter the Florida market for several years. Patrick White is listed as the current CEO and President of Lighthouse Property Insurance.
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