KBRA Affirms Rating for Loggerhead Reciprocal Interinsurance Exchange
17 Jun 2024 | New York
KBRA affirms the BBB Insurance Financial Strength Rating (IFSR) for Loggerhead Reciprocal Interinsurance Exchange (“Exchange” or “Loggerhead”). The Outlook is Stable.
The rating reflects Loggerhead's low underwriting leverage, favorable market opportunity, no legacy liabilities, and manageable start-up expenses due to its organizational structure. While underwriting leverage will increase consistent with forecasts as the business scales, Loggerhead’s surplus position compares favorably to the current level of premium writings. Loggerhead is one of a handful of recently launched companies that have entered a Florida personal residential homeowners’ sector characterized by improved market conditions. KBRA views the company’s business plan as reasonable, with a management team that has considerable experience in the Florida homeowners’ insurance market. As noted within the recent developments section, the company’s capital position will benefit from the anticipated issuance of additional surplus notes.
Balancing these strengths are the company’s high financial leverage, product and geographic concentration, exposure to event risk and reliance on reinsurance, and execution risk. Given Loggerhead’s surplus base consisted entirely of surplus notes at inception, financial leverage is high. Loggerhead is a single state carrier, and its revenues are comprised of primarily personal residential property premiums which exposes its earnings profile to potential volatility. Geographic and earnings concentration necessitates a dependence on reinsurance and exposes the company to event risk and the occurrence of natural catastrophes and severe weather events. Lastly, as a recently launched company, there is limited track record of financial results and favorable operations are dependent upon management executing its business plan.
Loggerhead Reciprocal Interinsurance Exchange, headquartered and domiciled in Florida, is a recently launched reciprocal exchange. Loggerhead is managed by Loggerhead Risk Management, LLC, (LRM) the attorney in fact. LRM receives a fee from the Exchange for underwriting and claims management, as well as all operational functions.
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