Florida Property Insurance: Northern Capital Loses Rating; HomeWise Consolidates

One fast-growing Florida homeowner insurer has had its rating pulled by its rating agency and reportedly halted new business while another domestic carrier is consolidating its business into one company from two.

Northern Capital Insurance Co. — named the fastest growing small company in the nation by Inc. Magazine in 2009 —did not come up with the capital it needed to retain its Financial Stability Rating of “A, Exceptional” from Demotech, Inc. by the deadline, so the ratings firm withdrew the rating on Feb. 18.

In the other move, HomeWise Insurance Group said it is consolidating all of its business into HomeWise Insurance Co. and will no longer be writing through HomeWise Preferred.

Northern Capital is solvent and could have its rating restored after it raises capital to bolster its surplus, which it is in the process of doing, according to Demotech.

“Northern Capital Insurance Co.’s management has been actively involved in raising funds to bolster the surplus of the company in order to enhance the protection available to its policyholders. However, the company has not met the timeline discussed and agreed upon,” Joseph L. Petrelli, president of Demotech, stated.

Petrelli said that after the company infuses funds and implements a revised business model, the insurer can ask Demotech to review the situation.

According to the Florida Insurance Agents Association, Northern Capital has stopped accepting new business in the meantime but will process renewals.

Northern Capital did not respond to messages left by Insurance Journal.

Inc. Magazine ranked North Capital No 1 in its list of the 500 fastest growing small companies for 2009. Its revenues grew from $476,898 in 2005 to $95 million in 2008—a 19,812% growth.

Demotech also withdrew its rating of HomeWise Preferred Insurance Co. — but this time it was because this firm will no longer be writing business. Instead, its business will be assumed by its related subsidiary, HomeWise Insurance Co., which has boosted its surplus to $20 million, more than enough to keep its “A” rating from Demotech.

HomeWise Insurance Group notified state regulators of its intent to discontinue writing business in HomeWise Preferred on Feb. 19.

Demotech said the withdrawal of the rating for HomeWise Preferred should not affect its operations. Homewise Preferred has more than $17 million in surplus, according to the insurer’s CEO.

Demotech also affirmed its “A” rating assigned to HomeWise Insurance Co. after reveiwing the details of the recent capital infusion and the insurer’s revised business plan.

Dale Hammond, HomeWise Preferred president and CEO, in a letter to the company’s agents, said the company’s surplus for the quarter ending Dec. 31, 2009 was up $12 million. This infusion will help the company provide a “continuing market” for homeowners, he told agents.

Hammond said the firm has been writing all new policies in HomeWise Insurance Co. and been transitioning renewals from HomeWise Preferred to HomeWise Insurance Co. for several months and that process will continue.

As of January, HomeWise Insurance had 113,478 policies; HomeWise Preferred had 27,234.

Hammond said that the company hopes to accommodate most of its policyholders.

“Our intention is to offer a new HomeWise Insurance Co. policy to all HomeWise Preferred policyholders, subject to our underwriting and exposure management programs. If a renewal policy has already been issued in HomeWise Preferred we will rewrite the policy in HomeWise Insurance Co. You will not need to take any action,” he wrote to agents.

Hammond told Insurance Journal that agents should know that “both companies are financially sound” and that management is just being “proactive” in dealing with losses in HomeWise Preferred, including some involving sinkholes. The company is not looking to cutback and is still accepting new business. “We feel good about the Florida market going forward,” Hammond said.

Since opening in Florida in 2006, HomeWise has expanded beyond Florida. HomeWise Insurance Co. is admitted in Florida and Louisiana. HomeWise Preferred Insurance Co. is admitted in Florida and South Carolina.

Hammond said the closure of HomeWise Preferred in Florida would have no impact on Louisiana while the situation in South Carolina, where it has only 10 policies, is being worked out.