As South Florida braces for hurricane season, new data from insurance regulators shows that 10 of Florida's 20 largest privately run homeowners insurers lost money in 2005.

Analysis of that data by Jupiter-based Weiss Ratings indicates that eight of those companies could be in weak condition.

Weiss rates insurance companies on its analysis of their ability to pay current claims and their ability to deal with severe economic adversity and a sharp increase in claims. Weiss has D and D ratings for companies it considers weak and E and E ratings for those it considers very weak.

"A company with that rating is already weak before the prospect of a hurricane that could lead to a major loss," said Melissa Gannon, a Weiss VP. "As a policyholder, you should check out the company and see what your major options are."

That information can be obtained from the Florida Office of Insurance Regulation (OIR), Weiss Ratings and other ratings agencies.

Gannon and Peter Brink, a Weiss senior analyst, declined to comment on operations of any companies on the list of Florida's 20 largest homeowners insurers as of Dec. 31. But they noted that Atlantic Preferred Insurance and Florida Preferred Insurance, two now-failed subsidiaries of Poe Financial Group, were fourth and fifth largest on that list, with ratings of D and E , respectively.

On June 1, a state court put those companies and Poe's Southern Family Insurance in receivership under the Florida Department of Financial Services. Since late last year, many Poe policyholders had difficulty collecting claims for hurricane damages. Many of Poe's 320,000 customers might not be able to obtain policies from other companies and, as of July 1, will be covered by state-run Citizens Property Insurance Corp.

Those problems are a reminder of how homeowners and renters can benefit from long-term monitoring of their insurers, Brink said.

Atlantic Preferred, Poe's largest company, had a Weiss rating of C at the end of 2001. Following 2004's hurricanes and claims, Atlantic Preferred fell to D at the end of that year, and then to D at the end of last year.

Weiss's Web site has financial information and ratings on all companies that write property insurance in Florida.

Fitch Ratings and A.M. Best also rate some of the largest companies that write property insurance policies in Florida.

The three firms provide some information for free, and have varying charges for more detailed information.

Weiss' charge for a full report on any insurance company, with financial information and Weiss' letter rating, is $14.99. Multiple reports are available at lower prices.

The Florida OIR Web site has contact information and data, including number of policies for all insurance companies licensed in Florida and links to their Web sites.

Weiss does not monitor Citizens, whose 833,797 policies at the end of last year made it the second largest in Florida.

As of last month, Fitch had an A- rating for Citizens. That rating is based on Citizens' ability to assess all Florida policyholders to help cover its losses, Fitch's AA rating for Florida's general obligation bonds and its AA rating for bonds issued by the Florida Hurricane Catastrophe Fund.

Fitch and A.M. Best have top ratings of AAA, compared with Weiss' top rating of A.

Weiss ratings often are a grade below those of other agencies because Weiss puts a higher weight on what it views as insurance companies' claims-paying ability in worst-case scenarios, Brink said.

Weiss obtained income and loss numbers from the National Association of Insurance Commissioners (NAIC), based on reports insurers filed with the OIR, then sent to the NAIC.

The largest insurers on the list are subsidiaries of industry giants State Farm, Allstate and Nationwide.

During the mid-1990s, those parent companies and several other insurers set up separate Florida property insurance companies to isolate Florida hurricane claims and losses.

Weiss' ratings of the Florida subsidiaries are based mostly on the capital and other financial aspects of those individual companies, and also factor in their parents' finances. Its ratings for Florida's largest insurers are C for State Farm Florida Insurance, B- for Allstate Floridian and C for Nationwide Insurance of Florida.

The two A companies on the list, United Services Auto Association and USAA Casualty Insurance, are subsidiaries of San Antonio-based USAA, which writes homeowners policies and other insurance mostly for current and former members of the military.

Seven companies in the 11th through 20th places have D or E ratings. Those companies were formed during or since the mid-1990s, and did most of their early business by assuming policies from Citizens.

Four of those companies - Universal Property & Casualty, Florida Family Insurance, Vanguard Fire & Casualty and Tower Hill Preferred Insurance - were among the state's 20 largest homeowners insurers at the end of 2004. All four had more capital and reserves at the end of last year than at the end of 2004.

Without immediate access to data on the companies, Brink said some young insurance companies have been able to minimize losses by diversifying their business around Florida and, in some cases, by adding capital.

In general, Weiss has low ratings for many young companies because they have not proven ability to withstand multiple years of claims and do not have ready access to deep-pocket parents.

Fitch's rating for Florida's three largest homeowners insurers are B for State Farm Florida Insurance, B for Allstate Floridian and B for Nationwide Insurance Co. of Florida.

A.M. Best does not rate those companies.

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By Jim Freer
South Florida Business Journal

Updated: 8:00 p.m. ET June 11, 2006

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