New Juice in Florida Market: Orange Insurance Exchange Approved by OIR

Just days after another hurricane smashed through part of Florida, another property and casualty insurer has been approved for the state, providing more evidence that 2022 legislative limits on litigation are having a desired effect.

“I think investors’ appetites have increased after the legislative reforms, and they see where the market is right now and the need for additional capacity in the market,” said Donald Matz, the chairman of Orange Insurance Exchange.

The Florida Office of Insurance Regulation approved Orange on Sept. 1, making it the latest of several insurers to follow the reciprocal exchange model. Others include Tower Hill Insurance Exchange, Kin Interinsurance Network and Loggerhead Reciprocal Interinsurance Exchange.

“We think it’s a good model for the Florida market,” Matz said.

The firm is starting off with $25 million in surplus and plans to start writing in December – after the current hurricane season. Company leaders hope to have a full reinsurance program in place before the 2024 hurricane season begins June 1. They plan to offer homeowners’ multiperil and commercial residential policies.

Orange may be a new company but its principals are well-known in the industry. Matz spent 26 years with Tower Hill Insurance Group, and recently spent a year with Producers National Corp. He recently returned to his home of Gainesville, Florida, to help manage Orange.

The president of underwriting for Orange is Michael McNitt, the longtime head of Cabrillo Coastal, a managing general insurance agency that specializes in hard-to-place policies in Florida and other states. Cabrillo Coastal will will have an ownership stake in Orange and will service its policies, McNitt said Tuesday.

“We have the proven infrastructure for that,” he said.

Daniel Riddle, Cabrillo’s vice president of statutory accounting, is listed as chief financial officer for Orange.

Rumors circulated this week that the company had asked former Citizens Property Insurance Corp. CEO Barry Gilway to serve on the board, perhaps as chair. But Matz and Gilway said Tuesday that Gilway is not involved with Orange “at this time.”

Gilway, who in December stepped down from a full-time role at Citizens, appeared to leave the door open for future involvement, as long as it’s not a full-time management position.

“Fifty-two years of managing insurance on a 24-7 basis is enough,” he said.

Gilway heralded the entrance of another private carrier into the Florida market, after three years of multiple insolvencies by Florida carriers and the pullback of others from the market.

“The market is starting to correct itself. The legislation is having an impact,” he said.

OIR has approved four others in the last few months, including Orion180 Insurance Co., Orion180 Select, Mainsail Insurance Co. and Tailrow Insurance Co.

State regulators touted the new business in the battered Florida market.

“We’ve got another insurer coming online and we’ve got more policies being taken out of Citizens – all after a CAT 3 hurricane hit Florida,” Florida’s chief financial officer, Jimmy Patronis, said in a statement.

The Orange business model will work something like this, according to Matz, McNitt and the OIR consent order: Orange Insurance Managers is the attorney-in-fact. The exchange issues policies to subscribers. Each subscriber will be required to make a surplus contribution equal to 10% of the subscriber’s annual premium.

The initial surplus has come from investors who purchased surplus notes from the exchange, Matz explained. Through the surplus contribution, policyholders pay the interest (and eventually the principle) on the notes until they own the company 100%.

“The exchange model has a lot of benefits and seems to be more attractive to investors now,” Gilway said.

Matz said the firm plans to have no restrictions on where it writes in Florida. His team is working with financial rating firms “as we speak,” but he did not say which firms. AM Best, Demotech and KBRA had not rated Orange as of Tuesday evening.

Like others in the Florida market, Orange appears to be limiting its exposure on roofs. The industry has blamed rising roof costs, fraudulent and exaggerated claims, along with assignment of benefits and lawsuits over roof claims for driving exorbitant loss adjustment expenses in recent years, although recent state legislation addressed all of those issues.

Still, an Orange rate filing on HO policies, filed with OIR Aug. 16, includes a broad roof endorsement that bars coverage for most roof damage that comes outside of named storms. It’s similar to recent endorsements approved for Slide Insurance and for American Integrity Insurance.

The endorsement also includes a roof surfaces payment schedule. The exchange will pay toward the lesser of two options – repair or replacement – with diminishing amounts, depending on the age of the roof. For a 10-year-old shingle roof, for example, the policy would pay 60%. For a metal roof, it would pay 90%.

Orange Insurance Exchange may have an eye-catching logo, but the “orange” name is not uncommon in Florida and other states’ insurance arenas, and it already has caused some confusion. The exchange should not be mixed up with local agencies, brokers and bonding firms that use the orange name and color, Matz said.