In South Florida, conventional wisdom has been that shopping for property insurance started and stopped with state-backed Citizens Property Insurance Corp.

Slowly, that's starting to change.

Though market leaders State Farm Florida Insurance Co., Allstate Floridian Insurance Co. and Nationwide Insurance of Florida are dropping longtime policy holders and not taking on new policies, start-up companies are moving to offer coverage.

Since January, eight insurers have received approval from the state Office of Insurance Regulation to cover Florida homes, with another three companies waiting for the go-ahead.

These Florida-based firms don't have the cachet of the national brands that advertise during Sunday football games and American Idol, but they have one quality the big guys don't: a desire to take on thousands of new customers.

The environment couldn't be better for a new insurance company looking to grow, insurance executives say.

"The larger companies are both canceling and not writing any new business. Construction continues to flourish in the state of Florida … and the population of the state of Florida continues to grow," said Frank McCahill, president and chief executive of Homeowners Choice, a new insurer based in Port St. Lucie. "We feel that this is the perfect time to enter the business."

McCahill's company already has taken 15,000 policies once insured by Citizens, now the largest home insurer in Florida. In January, Homeowners Choice will start selling policies through nearly 700 independent insurance agents.

Another start-up insurer, Olympus Insurance Co. of Orlando, already started selling insurance to Florida homeowners. The company won't take over any Citizens policies, depending instead on growing its own base, said Olympus President Bill Lowry.

There's a huge demand for policies, and limited supply, which Lowry said translates to good growth potential for his fledgling insurer. "The biggest risk for any new company is being able to generate revenues," Lowry said. "There are enough people that need insurance that that was not going to be an issue in Florida."

Staying solvent
Should Floridians be skittish about buying insurance from an insurance company that only insures properties in Florida? Thousands of South Floridians found themselves looking for a new insurer after back-to-back losses from major hurricanes in 2004 and 2005 bankrupted three insurers run by Tampa-based Poe Financial Group.

Many former Poe customers ended up with Citizens, and Poe's demise has meant all Florida property insurance policy holders pay. The Florida Insurance Guaranty Association, which pays claims for bankrupt insurers, has approved three separate 2 percent assessments on virtually all of the state's property owners to help cover Poe claims.

There's no guarantee another Florida insurer won't fail again, but Insurance Commissioner Kevin McCarty said his department carefully reviews every new company's application — examining the business plan, ensuring the company has enough capital and enough backup coverage in place to help pay claims after a major hurricane, and how it plans to distribute policies throughout the state so the risk is evenly spread.

"We have very strong solvency standards here in Florida and we are doing our best to minimize future failures," McCarty said.

And, McCarty said, being with a big company doesn't equal stability in the aftermath of a major hurricane. After Hurricane Andrew hit in 1992, insurance companies such as State Farm had to get a cash infusion from their parent companies to stay afloat.

For their part, insurance executives say they are paying close attention to how many policies they sell throughout the state, and have secured enough capital and backup coverage called reinsurance to bolster them should catastrophe strike.

Of the eight new companies approved since January, three have more than $50 million in capital, according to figures from the Office of Insurance Regulation. The rest have at least $9 million. The state's minimum capital requirement is $5 million.

Due diligence
Homeowners researching a new insurance company may run into difficulties, said Melissa Gannon, vice president of insurance and bank ratings for TheStreet.com Ratings. For instance, Gannon said her firm doesn't track newer companies yet because there is not sufficient information to produce a financial strength rating.

That doesn't mean it's impossible to get information about start-up insurers. Homeowners considering an offer from a new insurance company should make sure to press their agents for as much background as possible, said Bob Milligan, Florida's insurance consumer advocate.

While he said he's sure state insurance officials do all they can to scrutinize companies before approving them to issue insurance policies, Milligan said consumers also need to do their homework.

The first thing that homeowners need to press their insurance agents to find out is how insurers plan to spread their policies throughout the state, Milligan said.

"What does the portfolio of one of these companies look like?" Milligan said. "Are they spreading their risk in terms of geography, and spreading [policies] between closer to water and inland?"

Agents should be able to find that information out from the insurers, Milligan said.

Homeowners also should ask agents how insurers will handle their claims, whether a company has its own force of insurance adjusters or has contracts with adjusting firms outside Florida, and ensure they are getting all the discounts to which they're entitled, Milligan said.

Overall, he thinks the new companies' entry into Florida will help the insurance market, because homeowners will have a choice.

"It's a really good thing that we have some investment willing to be put into the insurance market, and provide options to the citizens of Florida," Milligan said. "… If you have competition that generally helps pricing. That generally helps a lot of things."

Kathy Bushouse can be reached at kbushouse@sun-sentinel.com

new property insurers

The state approved a license this year for these companies, some of which have Web sites:

Privilege Underwriters Reciprocal Exchange: www.purehnw.com

American Keystone Insurance Co.: www.akicinsurance.com

Homeowners Choice Property & Casualty: www.hcpci.com

Olympus Insurance Co.: www.oigfl.com

American Coastal Insurance Co.

Landmark One Insurance Co.

Modern USA Insurance Co.

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