KBRA Affirms Rating for Orange Insurance Exchange

KBRA affirms the BBB insurance financial strength rating for Orange Insurance Exchange ("Orange" or "the Reciprocal"). The Outlook is Stable.

The rating reflects Orange Insurance Exchange’s capable management team, which is well experienced in underwriting Florida's high-risk catastrophe market and has successfully executed several key strategic initiatives since the company’s inception. Orange maintains a conservative balance sheet characterized by strong liquidity, a high-quality investment portfolio and disciplined asset/liability management. Additionally, Orange has a well-established and diversified distribution network consisting of 3,000 active independent agents and several large agencies. KBRA views the breadth of these distribution channels favorably, as they provide multiple avenues for profitable business generation while reducing dependence on any single producer or distribution source.

Balancing these strengths is the company’s high financial leverage due to the majority of its surplus base currently consisting of $37 million in surplus notes. While Orange is targeting growth in the Florida property market that has benefited from legislative reforms, it faces increased competition that has put pressure on rates. As a result, its premium growth targets are subject to execution risk. Furthermore, as a Florida homeowners’ writer, Orange has product and geographic concentration, natural catastrophe exposure due to hurricanes, and high reinsurance dependence that, depending on availability and affordability, could materially impact results. As a de novo insurer, Orange has a limited operating history and remains in the early stages of establishing a sustainable operating franchise. While management has made meaningful progress executing its business plan, successful completion of these initiatives and demonstration of sustainable operating performance through multiple catastrophe and reinsurance pricing cycles remain important credit considerations.

Factors that could lead to an upgrade include material favorable execution relative to the business and projections provided to KBRA, sustained underwriting profitability generating organic surplus growth, a favorable change in risk profile, and a sustained reduction in surplus note leverage.

Factors that could lead to a downgrade include material unfavorable execution relative to the business plan and projections provided to KBRA, significant weather events that materially impact earnings and capital, an inability to obtain reinsurance on acceptable terms and pricing, causing an increase in loss exposure, a reduction in the Orange’s ability to underwrite policies or a drag on earnings, an unfavorable change in risk profile, and the departure of key members of the management team without suitable replacement.

Orange is a property and casualty reciprocal insurer organized and licensed in the state of Florida. Orange received its Certificate of Authority in October 2023 and began writing business in December of 2023. The company primarily writes personal and commercial property insurance in the state of Florida and distributes its products through independent agents.

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