KBRA Affirms Ratings for First Protective Insurance Company and Frontline Insurance Unlimited Company
24 Aug 2023 | New York
KBRA affirms the BBB+ insurance financial strength ratings (IFSR) for First Protective Insurance Company and Frontline Insurance Unlimited Company. The Outlook for both ratings is Stable.
First Protective Insurance Company (FPIC) is a property/casualty insurer focused on writing personal homeowners coverage primarily in Florida as well as four other coastal states in the Southeast. Frontline Insurance Unlimited Company (FIUC; together with FPIC, “the Company”) is a property/casualty insurer focused on writing predominantly commercial multi-peril as well as allied lines primarily in Florida as well as four other coastal states in the Southeast. The Company writes policies under its Frontline Insurance brand, and its newly launched OpenHouse Insurance brand.
Key Credit Considerations
The ratings for both entities reflect an experienced management team with a focused strategy, a solid, well-structured reinsurance program with retention which compares favorably relative to surplus, financial flexibility through a holding company/managing general agent (MGA) structure, and strong local market presence with a well-established distribution network supportive of targeted growth. Distribution efforts will be enhanced by the launch of the Company’s OpenHouse Insurance brand, a digital InsurTech platform, as well as expansion of commercial lines to FPIC.
While both companies have reported underwriting losses in three of the last five years primarily due to elevated natural catastrophe events, KBRA views near-term financial results favorably, driven by strong underwriting, pricing, and claims handling, which compare favorably to Florida peers.
Balancing these credit strengths are the Companies’ moderate geographic and earnings concentration within Florida and other Southeastern coastal areas that exposes the Company to natural catastrophes and elevated event risk. The Company’s business strategy makes both companies dependent on reinsurance. While favorable in relation to stated targets, risk-based capitalization and premium leverage at each company generally compare unfavorably to Florida peers.
Sustained underwriting profitability, favorable changes in risk profile, including purchase of higher reinsurance limit, reduced retention relative to surplus, or significantly strengthened risk-adjusted capitalization, organic surplus growth and improved underwriting leverage, or favorable execution of planned geographic expansion could result in positive rating action.
Deterioration in risk-adjusted capitalization and underwriting leverage, namely exposure growth which outpaces capital growth, unfavorable changes in risk profile, namely inability to obtain reinsurance on acceptable terms and pricing, a decline in credit quality of the reinsurance panel, an inability to collect on reinsurance, or exceedance of reinsurance program limits, or sustained material adverse reserve development could result in negative rating action.
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