AM Best Places Florida Farm Bureau Ratings Under Review After Idalia Losses Pile On

November 20, 2023

AM Best has placed under review with negative implications the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Ratings of “bbb+” (Good) of Florida Farm Bureau Casualty Insurance Co. and its fully reinsured subsidiary, Florida Farm Bureau General Insurance Co.

These companies are collectively referred to as Florida Farm Bureau Group and are domiciled in Gainesville.

The rating firm said the insurer’s credit ratings are under review with negative implications following a “considerable decline in the group’s key balance sheet strength metrics” through Sept. 30, 2023.

In particular, AM Best cited erosion in policyholders’ surplus driven primarily by loss activity from Hurricane Idalia, which exceeded Florida Farm Bureau Group’s occurrence catastrophe retention level. “Surplus volatility concurrent with ongoing increases in net premiums written due to rate activity has resulted in elevated underwriting leverage measures, as well as a notable drop in the group’s overall level of risk-adjusted capitalization,” the announcement stated.

The announcement noted that Farm Bureau management plans on implementing various capital management strategies to address elevated underwriting leverage as the group rebuilds surplus through operating results. AM Best said it expects that these strategies, alongside sizable rate increases, a refined book of business and recently enacted legislative changes in the Florida property insurance market, will help improve the insurer’s key balance sheet strength metrics.

However, AM Best cautioned that the ratings will remain under review with negative implications until it can fully analyze the impact of management’s plans and “if the strategies do not come to fruition as anticipated or fail to substantially alleviate pressure on key balance sheet strength metrics, further rating action is likely.”

In October 2021, AM Best downgraded its outlook for Florida Farm Bureau Casualty Co., from stable to negative, due to the company’s declining surplus in a disaster-prone state. AM Best noted that in the last five years, Florida Farm Bureau’s surplus had declined 13% or about $38 million, through the second quarter of 2021.

Florida Farm Bureau Action Plan Says it Will Stop Writing New HO Policies

In February 2022, Florida Farm Bureau announced a five-point action plan that included a halt to writing new homeowners and dwelling-fire policies. The company also said it would consider non-renewing about 7,500 homes with older shingle or tile roofs.

S&P Report Sheds Light on Florida Farm Bureau’s Losses

When Florida Farm Bureau Insurance companies filed for a sizable 41% rate increase for homeowners coverages in December 2021, the Florida Office of Insurance Regulation asked company actuaries to try again. The insurer rethink its filing and came back with an even larger average rate request of 48.7% in May 2022.

Some industry analysts consider Florida Farm Bureau something of a bellwether for the distressed Florida property insurance market. According to an S&P Global Market Intelligence report published in February 2022, the insurer recorded net losses for seven straight quarters from 2019 through most of 2021. That’s a total of almost $50 million in losses, despite an increase in direct premium written in recent years.

Hurricane Idalia struck the less-populated Big Bend area of Florida in late August of this year. While overall losses from Idalia have been lower than feared, they will affect underwriting results for a number of carriers, AM Best predicted in a report released in September.

Florida Farm Bureau is part of Mississippi-based Southern Farm Bureau Casualty Insurance Co.