Florida Homeowners Market... At the Tipping Point?

Transcription

1 Florida Homeowners Market... At the Tipping Point? December, 2009 Aon Benfield Analytics 200 East Randolph Street Chicago, IL t: f:

2 Florida Homeowners Market At the Tipping Point? The 2009 Hurricane season has ended, marking the fourth consecutive year without a significant hurricane making landfall in Florida. Even without significant hurricanes in the last four years, the state of the homeowners (HO) insurance market appears to be at a tipping point. Recent comments from Florida s insurance regulators may signal an opportunity to tip the market in a favorable direction for insurers and to a more sustainable insurance market for Florida s homeowners. Recent insolvencies, however, show that there is a risk in which years of intense rate scrutiny, rate making process delays and significant reliance on unfunded state assessmentbased catastrophe loss funds may have already taken their toll on the HO insurance market. In 2009, two HO insurers have been placed into liquidation by the Office of Insurance Regulation (OIR), and national carriers led by State Farm have announced their plan to withdrawal from the market. The withdrawal from the Florida HO insurance market is a continuation of a trend that is largely return and risk tolerance driven for national HO insurers. To fill the gap left by these larger carrier withdrawals, many new HO insurers formed. Today, more than 50 companies write more than $25 million of HO premium. Approximately 75 percent of Florida HO premium is written by insurers with an A.M. Best rating lower than A- or by those that are unrated. Citizens Property Insurance Corporation (Citizens), the State of Florida s (State) competitive and residual HO insurer, has a market share of more than 14 percent, which adds materially to the State s exposure to insured catastrophes. The State s exposure also includes $23.2 billion of projected capacity from its Florida Hurricane Catastrophe Fund (FHCF). Even with the State s catastrophe leverage high, it is difficult for Citizens to gain the rates it says it needs. In an October rate filing hearing, Citizens indicated a 40 percent rate increase is necessary to make rates actuarially sound. In November, a 5.3 percent average rate increase was approved by regulators. Although improved compared to the beginning of the 2009 Hurricane season, the FHCF has a $4.2 billion shortfall post-borrowing capacity ($15.2 billion shortfall pre-borrowing capacity), according to a recent Raymond James report presented to the Cat Fund Advisory Council indicated. Aon Benfield estimates that a 1 in 100 year hurricane strike in Florida would result in estimated losses in excess of $100 billion. Given an event of this size, Florida (and its residents) would be on the hook for more than 25 percent of the losses through Citizens and the FHCF. Despite operating in the world s peak catastrophe market, most Florida-based HO insurers are capitalized at lower levels than their non-florida peers, as measured by NAIC s risk-based capital (RBC) ratio. Despite low storm activity, underwriting results have been deteriorating, impacted by substantial mitigation credits, higher reinsurance costs in 2009 and an uptick in fraudulent claims activity. However, 26 companies have had rate filings with increases approved in 2009 with an average approved rate of 10 percent; another 28 have filings for rate increases pending. To put these rate increases into perspective, a recent Aon Benfield national study of prospective rates showed that a 93.5 percent rate increase would be required for the top five carriers in Florida (excluding State controlled Citizens) to attain a 14 percent return on equity. Failures and Withdrawals from Florida In October, the OIR placed a second Florida HO insurer, American Keystone Insurance, into receivership within six months. In April, Coral Insurance was also taken over by the State. A stated reason for both companies insolvency was insufficient funds to pay for adequate reinsurance protection. Coral was in operations for five years, while American Keystone lasted only three years. Meanwhile, State Farm has a hearing scheduled with the OIR in January regarding its request to withdraw from the property market. As of year-end 2008, State Farm had a 15.6 percent market share of Florida HO business. Nationwide recently announced a plan to non-renew up to 60,000 policies to reduce catastrophe exposure. Proprietary & Confidential Page 2

3 Therefore, there are a number of policyholders who will be in need of replacement insurance in the near term, and many who will have to live with significantly less capitalized, lower-rated or unrated insurers. In the past, the market was able to respond as the number of companies writing more than $25 million in Florida HO business increased 50 percent since 2003, benefiting from a number of start-up companies during this period. The ability of the market to continue to take on business from exiting insurers is very sensitive to the rate environment and the recent activity may be a welcome sign of a more positive environment. Quality and Oversight of Insurers The graph below shows Florida HO insurers A.M. Best ratings evolution over time. In 2001, 80 percent of the market was rated A- or higher by A.M. Best; by 2008, that category dropped to 25 percent. This dramatic decrease is due in part to A.M. Best s increased emphasis on the catastrophe stress test (which requires companies to have sufficient capital for two 1 in 100 hurricane events) following the active 2004 and 2005 storm seasons. Some large national carriers, like State Farm and Nationwide, began operating their standalone Florida subsidiaries with lower levels of capital adequacy as measured by A.M. Best, and these subsidiaries were downgraded from A- ratings to B level ratings Current* 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% A- and Better B++ B+ Vulnerable Not Rated Citizens *2008 year-end market share with ratings as of December 2009 Proprietary & Confidential Page 3

4 Meanwhile, Demotech became an active player in Florida HO insurers ratings, providing an alternative to an A.M. Best rating. In 2009, over concerns regarding profitability, Demotech removed ratings from four active insurers despite no significant storm losses. The graph below depicts the Demotech ratings distribution of Florida HO insurers over time Current* 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% A'' A' A Reviewed - Not Rated Citizens *2008 year-end market share with ratings as of December 2009 Proprietary & Confidential Page 4

5 Florida s Insurance Bet A Raymond James report recently presented to the Cat Fund Advisory Council indicated the FHCF s claims paying capacity at $19 billion, including post-event borrowing of $11 billion, which was determined from a range of estimates between $5 billion and $20 billion. The post-event bonds of $11 billion, in combination with the projected year-end fund balance of $4.5 billion and $3.5 billion of available pre-event notes, comprise the $19 billion total capacity. This amount would cover the full mandatory layer and a portion of temporary increase in coverage limits (TICL) layer for the 2009 season, leaving a $4.2 billion shortfall. These estimates are significantly more optimistic than in October 2008 or May 2009, when the post-event bonding estimates were $3 billion and $8 billion, respectively. Due to the improvement in the capital markets, as well as legislation passed in May 2009, the FHCF s financial position is stronger than last year. However, there is still a great deal of uncertainty surrounding the post-event bond issuance and thus, the FHCF s claim paying capacity. Based on the capacity described above, an event that exhausts the FHCF would result in policyholders paying a 3.9 percent assessment for 30 years to cover the post-event financing of $11 billion. This would be in addition to the 1.0 percent assessment in place through 2014 to pay for losses from previous years (principally Wilma, 2005). Separately, the companies that purchased TICL would bear the credit risk associated with any unfunded amount. The schematic below illustrates the capacity for the FHCF and TICL layers of coverage for 2009 in conjunction with estimated sources of funding. $36.5B $5.56B TICL Coverage $4.20B Potential Shortfall* $25.4B $11.00B Projected Post Event Borrowing Capacity $17.18B Mandatory Coverage $3.50B Series 2007A Pre-Event Note Proceeds $7.22B $4.50B Projected 2009 Year- End Fund Balance Retention FHCF 2009 Obligations FHCF 2009 Reimbursement Capacity *Note: Reimbursement capacity includes $440M (Two limits of $220M) of potential liability for LAC layer coverage Source: Cat Fund Advisory Council October 20, 2009 Meeting Materials Proprietary & Confidential Page 5

6 Citizens net loss estimate for a 1 in 100 year storm is $13.3 billion, while it only estimates $4.1 billion in capital at the end of The FHCF currently needs to fund approximately $18.7 billion to cover its exposure to a 1 in 100 year event ($23.2 billion of total capacity less $4.5 billion of projected fund balance). This leaves Florida and its residents on the hook for nearly $28 billion in losses or more than 25 percent of the total projected $107 billion loss from a 1 in 100 year industry event in Florida. Following this type of an event, Citizens would be distressed and surviving companies would likely have to rely more heavily on external market reinsurance with considerably higher rates. Such a loss would have a significant, long-term impact on the Florida HO insurance market. However, many believe that Florida s insurance bet against significant storm losses is hedged by the politics of a federal bailout, if such an event were to occur. It is not certain though that a federal bailout, if any, would allow bailout funds to be distributed through current Florida market mechanisms such as Citizens or the FHCF. Following is an illustration of the source of Citizens claims paying capacity for a 1 in 100 year storm for both high risk accounts (HRA) and personal lines / commercial lines accounts (PLA/CLA). The claims paying capacity for this type of an event is supported by each account s surplus position, reinsurance program from the FHCF Mandatory and TICL layers, and Citizens policyholder surcharge (CPS) and assessment capabilities. It is noteworthy to mention that the 1 in 100 year probable maximum loss (PML) event shown is on a blended basis of near-term and long-term modeling results and does not contemplate loss adjustment expenses. Based upon the figure below, if a 1 in 100 year storm strikes Florida, Citizens would need to levy assessments that total $9.24 billion to Florida insureds. The assessments are levied in the year of Plan Deficit, but the Emergency assessments may be spread over multiple years. $14.65B yr ($ billions) HRA PLA/CLA Sum $9.86B $8.11B $5.70B $5.56B $1.56B $0.4B CPS $4.79B Emergency Assessments $2.00B Regular Assessments TICL 90% of $2.41B xs $5.70B Mandatory FHCF 90% of $4.14B xs $1.56B $1.60B PHS HRA Claims Paying Capacity Gross PML (100 year occurrence) Less: Ceded PML FHCF Mandatory TICL Net PML $7.44B yr $6.19B $5.39B $3.98B $2.80B $0.77B $1.25B Regular Assessments $0.80B CPS TICL-90% of 1.18B xs $2.80B Mandatory FHCF 90% of $2.03B xs $0.77B $2.50B PHS PLA/CLA Claims Paying Capacity Source: Citizens Board of Governors May 7, 2009 Meeting Documents Proprietary & Confidential Page 6

7 In the year following a 1 in 100 year storm, Aon Benfield estimates total assessments from the FHCF and Citizens would likely be as high as 21 percent of subject premium (assuming TICL capacity is only partially funded as previously discussed). This does not consider a potential 2.0 percent assessment from the Florida Insurance Guaranty Association (FIGA) if some insurers become insolvent following this event. Although the assessment percentage declines in subsequent years as Citizens CPS, Regular and Emergency assessments are satisfied, policyholders will continue to be taxed at least 3.9 percent for 30 years to repay the FHCF debt obligations. If TICL happens to be fully funded post event, the assessments levied from the FHCF and Citizens in total would be even higher. Capital Adequacy and Financial Trends In comparing the capital adequacy of Florida HO insurers versus non-florida HO insurers, our findings show that a disproportionate number of HO carriers are thinly capitalized as measured by NAIC s RBC ratio. As shown in the following table, 54 percent of Florida HO insurers have a strong 2008 RBC score of greater than 500 percent, though this contrasts to the non-florida HO population in which 88 percent of scores were greater than 500 percent. Even more telling is that for the non-florida HO population, there were no companies with an RBC score below 300 percent, while 21 percent of Florida HO insurers fell below this mark. A score of 200 percent represents the Action Level where companies are required to submit a corrective action plan to regulators. However, Florida HO insurers have grown their capital base in recent years as surplus is up by more than 50 percent from A driver of the increase in capital was the state-run insurance capital build-up incentive program that started in According to the State Board of Administration, which administered the program, 13 insurers qualified for $247.5 million of State-issued surplus notes and helped produce $543.5 million in total new capital for the market. The program s purpose was to increase the availability of residential property insurance by matching each company s capital infusion with a surplus note, subject to various approvals and constraints. In 2009, driven by the underwriting trends discussed below, the capital bases of Florida HO insurers dipped by approximately 6 percent through third quarter. While surplus has grown significantly over the last five years as noted above, it is only comparable to 2003 levels when the industry s perception of catastrophe risk was much different. It is noteworthy to mention that unlike most rating agency capital adequacy models, the NAIC RBC model does not currently incorporate a catastrophe risk charge. Therefore, the relatively low RBC scores for Florida HO insurers is even more concerning as one would expect companies operating in a high catastropheexposed market to be more strongly capitalized on a non-cat basis. There has been much discussion in recent years by the NAIC to incorporate a catastrophe risk charge within RBC. While the process has been slow and there is still uncertainty around elements of the catastrophe risk charge, it is expected to have a material impact on catastrophe exposed companies. Aon Benfield estimates that, if the RBC included a catastrophe risk charge that increased required capital by 15 percent, 29 percent of Florida HO insurers would fall below a 300 percent RBC score with 11 percent below a 200 percent RBC. By comparison, only 1 percent of non-florida HO insurers would fall below 300 percent (and zero below 200 percent). Distribution of RBC Scores Range FL HO Cos (56 Companies) 2008 RBC Scores Non-FL HO Cos (150 Companies) Pro forma RBC w/ Cat Charge (assumes 15% increase in required capital) FL HO Cos (56 Companies) Non-FL HO Cos (150 Companies) % 88% 48% 87% % 7% 9% 6% % 5% 14% 6% % 0% 18% 1% < 200 7% 0% 11% 0% Proprietary & Confidential Page 7

8 Meanwhile, underwriting results of Florida HO insurers have steadily deteriorated in recent years despite low storm activity. From 2006 to 2008, the net loss ratio has deteriorated from 51 percent to 72 percent, and was reported to be 84 percent as of third quarter Factors influencing these weak results include an inability to obtain adequate premium to cover reinsurance costs for operating in the world s peak catastrophe zone and Citizens, acting as a competitive insurer, recently quoting rates 40 percent below actuarial soundness. In addition, mandated discounts, related to mitigation credits to insureds that hurricane proof their homes, have been too generous and have effectively stripped out any wind load. Finally, many companies have seen an uptick in fraudulent activity tied to a weakened economy. Florida Homeowners Insurers Composite Homeowners Direct Loss Ratio 34% 25% 34% Net Loss Ratio 72% 59% 51% Expense Ratio 43% 50% 37% Net Combined Ratio 115% 109% 88% Change in Surplus -6% 16% 35% Separately, the FHCF announced that beginning in 2011, the contract year will change from a June 1 inception date to a January 1 inception date. In 2010, a short period contract will be written for the period June 1, 2010 through December 31, 2010 in advance of this change. As a result, companies will have to recognize additional ceded premium in calendar year 2010 due to the stub contract period plus the ceded unearned premium for January 1, 2010 through June 1, 2010 on the prior year's contract. This creates a pre-tax reduction of income and surplus equal to 5/12 of a company's 2009 FHCF premium. If this change occurred in 2008, the impact on Florida HO insurers would have been approximately $193 million. While the impact on individual companies would vary considerably, for many carriers it would have represented between 10 to 20 percent of PHS. Companies are currently lobbying the Florida legislature to implement a change that would mitigate the impact of this, though the outcome will not be known until next year. In September 2009, Aon Benfield released its updated Homeowners ROE Outlook, which analyzes the current and prospective return on equity (ROE) by state for the HO line of business. The countrywide estimated ROE for HO is 6.1 percent, down from 6.5 percent one year ago, and Florida s is 3.5 percent. The analysis confirms that the prospective ROE is now far less than the increased cost of insurer capital resulting from the global credit and liquidity crisis. Aon Benfield estimated that countrywide insurers would have to take a 26.4 percent rate increase to result in a 14.0 percent ROE, and Florida insurers (excluding State controlled Citizens) would have to take a 93.5 percent rate increase to achieve the same ROE. These estimates are based on analysis of actuarial support for rate filings of the five leading insurers in states making up 80 percent of U.S. population. The inability to earn reasonable returns from writing the staple product of HO insurance has the long-term effect of discouraging the participation of private capital in the market, leaving states to attempt to finance the highly volatile risks of their constituents. In turn, states have looked and will continue to look to the federal government to aid their growing homeowners insurance financing needs. These growing needs could be decreased through a more reasonable balance between the actual cost of providing insurance for one of the most volatile lines of business and rates allowed by insurance regulators and state law makers. Proprietary & Confidential Page 8

9 There are positive trends taking place, with 26 filings for rate increases approved and another 28 filings pending (see Appendix for detail). Approved rate increases have ranged from 3.0 percent to 27.9 percent, with an average around 10.0 percent. The pending filings for rate increases are comparable to the approved filings. Assuming these rates were fully implemented and earned, the 2008 combined ratio would have been 104 percent. Also, in November, a 5.3 percent average rate increase was approved for Citizens. Further, given a quiet hurricane season and the rebound of reinsurer balance sheets from the financial market crisis, there is belief that reinsurance costs will decline in The big question is whether the impact of rate increases and lower reinsurance costs will be enough. Conclusion The Florida HO insurance market could be nearing a tipping point, though whether it will tip positive or negative is still yet to be determined. Companies continue to produce combined ratios well in excess of 100 percent, and 2009 witnessed two companies go into receivership over an inability to pay reinsurance premiums. Therefore, one must consider whether the plan for new, lower capitalized companies to take a risk in Florida without being able to obtain adequate rate levels, while the national carriers continue to exit, is good for the long-term welfare of the market (especially without being tested by names like Andrew or Wilma). This is, however, offset by the emerging change in Florida regulation allowing companies for the first time in years to take reasonable rate increases. These rate increases are hopefully the first step to allow companies to work towards earning a sufficient return for the risk they assume and build their capital base. Contact Information For more information, please contact a member of the Aon Benfield Analytics team: Kelly Superczynski Pat Matthews Kathleen Armstrong Tracy Hatlestad Kelly.Superczynski@aonbenfield.com Patrick.Matthews@aonbenfield.com Kathleen.Armstrong@aonbenfield.com Tracy.Hatlestad@aonbenfield.com About Aon Benfield As the industry leader in treaty, facultative and capital markets, Aon Benfield is redefining the role of the reinsurance intermediary and capital advisor. Through our unmatched talent and industry-leading proprietary tools and products, we help our clients to redefine themselves and their success. Aon Benfield offers unbiased capital advice and customized access to more reinsurance and capital markets than anyone else. As a trusted advocate, we provide local reach to the world s markets, an unparalleled investment in innovative analytics, including catastrophe management, actuarial, and rating agency advisory, and the right professionals to advise clients in making the optimal capital choice for their business. With an international network of more than 4,000 professionals in 50 countries, our worldwide client base is able to access the broadest portfolio of integrated capital solutions and services. Learn more at aonbenfield.com. Copyright 2009 Aon Benfield Inc. This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The analysis and comments in this summary are based upon Aon Benfield s preliminary analysis of publicly available information. The content of this document is made available on an as is basis, without warranty of any kind. Aon Benfield disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Aon Benfield reserves all rights to the content of this document. Members of the Aon Benfield Analytics Team will be pleased to consult on any specific situations and to provide further information regarding the matters discussed herein. Proprietary & Confidential Page 9

10 Appendix 2009 Florida Homeowners Rate Filings Through November 15, 2009 File Log Date Effective Change Change Change Date Number 1 Status 2 Name Filed 3 Date 4 Indicated Requested Approved Notes 5 Approved Approved American Traditions 1/4/ /15/ % % % Homeowners Choice Property & Approved Casualty 1/12/ /15/2008 Universal Property & Casualty Approved Insurance Co 1/16/2009 2/27/2009 New 4/19/2009 Ren N/A N/A N/A 8.40% 4.80% 4.80% Approved Homewise Insurance 1/30/2009 9/15/ % 3.90% 3.80% Approved St. Johns Insurance 2/3/2009 Nationwide Insurance Approved of Florida Approved Edison Insurance 3/5/2009 Sawgrass Mutual Insurance Approved United Property & Casualty Approved Insurance Co 4/13/2009 New 6/1/2009 Ren 22.80% 13.90% 8.40% 2/20/2009 8/21/ % 7.20% 5.40% 6/17/2009 New 7/24/2009 Ren 21.30% 5.90% 9.00% 3/5/2009 4/21/2009 N/A N/A N/A 3/13/2009 9/15/ % 7.60% 12.90% 20.2% (20.4% non-fhcf) reinsurance cost. HO-3: 35.7% non-hurricane. Initial Tenants Filing HO-3: 24.7% (24.3% non-fhcf) reinsurance cost, 18.8% nonhurricane Wind-only program. HO-3: 27.2% (28.6% non-fhcf) reinsurance cost, 0.6% nonhurricane. HO-3: 28.2% (22.2% non-fhcf) reinsurance cost, 32.3% nonhurricane HO-3: 4.24% (4.10% non-fhcf) reinsurance cost, 59.7% nonhurricane. Indications calculated separately for hurricane and non-hurricane. 32.8% (29.8% non-fhcf) reinsurance cost, 28.4% nonhurricane Initial filing. 20.5% (20.6% non- FHCF) reinsurance cost HO-3: 21.8% (17.5% non-fhcf) reinsurance cost, 25.5% nonhurricane. 3/6/2009 2/3/2009 2/24/2009 6/9/2009 3/27/2009 5/6/2009 5/29/2009 4/16/2009 6/23/2009 Homewise Insurance Approved Homewise Preferred Insurance Hartford Insurance of Approved the Midwest Southern Oak Insurance Approved 3/26/2009 9/10/ % 5.00% 5.00% 5/1/2009 5/4/2009 7/18/2009 New 9/9/2009 Ren 8/3/2009 New 10/1/2009 Ren 16.50% 9.90% 11.20% 11.60% 7.90% 7.00% Approved First Home Insurance 5/18/2009 7/23/ % 14.90% 14.90% Tower Hill Select Insurance Approved United Services Automobile Association USAA Casualty Insurance Approved USAA General Indemnity Star and Shield Insurance Approved Exchange Safe Harbor Insurance Approved Tower Hill Prime Insurance Approved American Strategic Insurance Approved ASI Assurance Corporation Federated National Insurance Approved 6/3/ /1/2009 New 11/15/2009 Ren 16.70% 9.90% 9.90% 6/9/ /1/ % 9.00% 6.60% HO-3: 17.2% reinsurance cost, 41.3% non-hurricane. HO-2,3,5: 25.2% reinsurance cost, 37.3% non-hurricane LLAE ratio 21.9% (22.6% non-fhcf) reinsurance cost, 17.0% nonhurricane 21.6% reinsurance cost, 40.2% non-hurricane 22.8% reinsurance cost, 36.8% non-hurricane Owners Program. 25.9% (25.8% non-fhcf) reinsurance cost, 50.0% non-hurricane. 6/8/2009 6/11/2009 6/11/2009 5/29/2009 8/27/2009 8/13/2009 6/11/2009 6/19/2009 N/A N/A N/A Initial filing 6/17/2009 6/15/2009 6/15/2009 N/A -9.20% -6.00% 6/17/2009 6/19/ /1/2009 New 11/15/2009 Ren 10/1/2009 New 12/1/2009 Ren 15.70% 9.80% 9.90% N/A -1.40% -1.40% 7/1/ /1/ % 14.80% 19.00% Competitive adjustments. 22.8% reinsurance cost HO-2/3: 21.2% reinsurance cost, 41.3% non-hurricane. Change in wind mitigation calculations. 23.7% (24.4% non-fhcf) reinsurance cost, 28.7% nonhurricane 8/25/2009 9/1/2009 9/16/2009 9/25/2009 Proprietary & Confidential Page 10

11 File Log Date Effective Change Change Change Date Number 1 Status 2 Name Filed 3 Date 4 Indicated Requested Approved Notes 5 Approved 6 United Services Automobile Association Renters Program. 27.5% USAA Casualty Insurance Approved 7/29/ /1/ % 7.10% 8.30% reinsurance cost, 37.7% nonhurricane USAA General Indemnity 8/27/2009 Armed Forces Insurance Approved Exchange Universal Property and Casualty Approved Insurance 7/15/ /28/ % 2.90% 3.00% 7/15/ /22/2009 New 12/11/2009 Ren 19.80% 9.80% 14.60% Approved Edison Insurance 7/17/ /19/ % 12.10% 21.90% Auto Club Insurance Approved of Florida 7/20/ /18/2009 New 12/1/2009 Ren N/A -2.70% -1.40% Northern Capital Insurance Approved 7/22/ /20/2009 N/A 11.00% 11.00% Northern Capital Select Approved Insurance 7/21/ /20/2009 N/A 11.00% 11.00% State Farm Florida Insurance 11/1/2009 New Approved 7/24/ /1/2009 Ren Approved Castle Key Insurance 7/31/2009 9/14/2009 New 11/8/2009 Ren Castle Key Indemnity Insurance Approved American Integrity Insurance Approved ASI Preferred Insurance Approved 7/31/2009 9/14/2009 New 11/8/2009 Ren HO-3: 12.5% reinsurance cost, 31.4% non-hurricane. 32.8% reinsurance cost. HO-3/8: 23.6% non-hurricane. 33.8% (30.4% non-fhcf) reinsurance cost, 26.8% nonhurricane Competitive adjustments. 15.0% reinsurance cost as % of hurricane premiums, 5.0% reinsurance cost as % of nonhurricane premiums. 31.5% (27.8% non-fhcf) reinsurance cost 26.7% (18.8% non-fhcf) reinsurance cost 10/22/ /20/ /26/2009 9/11/2009 8/10/2009 8/10/2009 N/A 44.80% 27.90% 45.5% reinsurance cost 8/28/ % 7.10% 7.10% Limited Reinsurance Filing 8/27/2009 7/31/ /8/ % 11.10% 15.00% 8/7/2009 9/1/2009 N/A N/A N/A Approved Prepared Insurance 8/14/2009 9/15/2009 N/A N/A N/A Star and Shield Insurance Approved Exchange Pending Electric Insurance 8/20/2009 8/14/2009 9/14/2009 N/A -5.10% 0.00% 12/18/2009 New 1/17/2009 Ren 8.30% 6.50% 6.50% Limited Reinsurance Filing 8/28/ % 14.00% Takeout HO Program. 26.1% reinsurance cost, 39.0% non-hurr Initial filing for HO-4 Program. 69.1% reinsurance cost of reinsurance as % of hurricane premium. Initial filing for Voluntary HO Program. Change for competitive reasons. The 0.0% approved is from the OIR's figures. The change was approved as filed. HO-2,3,5: 21.3% (14.0% non- FHCF) reinsurance cost, 22.0% non-hurricane 9/23/2009 N/A 9/18/2009 9/8/ Pending Pending Pending Disappro ved Pending American Mercury Insurance First Floridian Auto and Home Insurance Phoenix Insurance Travelers Indemnity of America Travelers Indemnity American Integrity Insurance Co of Florida New Hampshire Insurance Privilege Underwriters Reciprocal Exchange 8/26/ Pending St. Johns Insurance 9/7/ /26/2009 New 12/26/2009 Ren 15.90% 13.30% 8/27/2009 1/1/ % % 8/28/ /28/ % 8.50% 9/2/ /30/ % -3.50% 9/2/ /3/2009 N/A 4.30% 12/5/2009 New 1/1/2010 Ren 46.10% 14.90% HO-3: 4.8% reinsurance cost, 41.8% non-hurricane. HO Dwelling: -0.5% (0.8% non- FHCF) reinsurance cost, 38.1% non-hurricane. Voluntary HO Program. 26.1% reinsurance cost. Conversion to ISO Loss Costs w/ Multiplier. 5.5% FHCF reinsurance cost, 14.8% nonhurricane. Disapproved because filing certification not included. 29.8% (12.1% non-fhcf) reinsurance cost. Alternate method produces 37.7% indicated and 13.9% proposed. HO-3: 36.2% (30.4% non-fhcf) reinsurance cost, 29.8% non-hurricane Pending Argus Fire and Casualty Insurance 9/9/ /15/ % 6.40% 28.7% (19.0% non-fhcf) reinsurance cost. HO-3: 70.7% non-hurricane Proprietary & Confidential Page 11

12 File Log Date Effective Change Change Change Date Number 1 Status 2 Name Filed 3 Date 4 Indicated Requested Approved Notes 5 Approved Pending Liberty Mutual Fire Insurance First Liberty Insurance Corporation 9/10/2009 1/1/2010 New 2/22/2010 Ren See Notes 14.70% Indicated: H2/3 33.1% H6 15.0% H4 12.8% Proposed: H2/3/6 14.7% H4 12.7% H2/3: 3.3% FHCF reinsurance cost, 61.1% non-hurricane Pending Olympus Insurance 9/18/2009 Universal Ins Co of North Approved America Pending Northern Capital Insurance 9/21/ Approved Ark Royal Insurance 9/29/ Pending American Platinum Property & Casualty Ins 12/18/2009 New 1/18/2010 Ren 11/15/2009 New 12/15/2009 Ren 55.30% 25.60% N/A 7.20% 7.20% 9/22/2009 1/1/ % 14.80% 12/1/2009 New 2/1/2010 Ren 10.40% 6.20% 6.20% 9/30/2009 1/1/2010 N/A N/A Alternate method produces 43.5% indicated and 19.5% proposed. HO-3: 24.4% (20.8% non-fhcf) reinsurance cost. Limited Reinsurance Filing. HO- 3: 27.9% reinsurance cost. Approved change uncertain. HO-3 Homeowners. 31.5% (27.8% non-fhcf) reinsurance cost. Limited Reinsurance Filing. 57.6% reinsurance cost as % of hurricane premium. Initial Rate Filing. 32.8% (31.9% non-fhcf) reinsurance cost. 10/7/ /12/2009% Pending Pending Pending Fidelity National Insurance Modern USA Insurance United Property & Casualty Insurance 9/30/2009 1/1/2010 N/A 14.30% 10/9/2009 1/1/2010 N/A 14.90% 10/15/2009 1/15/ % 14.10% HO-3: Indicated 16.5%, Proposed 15.0%, 27.8% (28.4% non-fhcf) reinsurance cost, 38.2% non-hurricane 39.8% (36.7% non-fhcf) reinsurance cost. HO-3: 30.6% (24.1% non-fhcf) reinsurance cost, 32.0% nonhurricane. Includes wind mitigation discount offset Pending Pending Pending Pending Horace Mann Insurance Teachers Insurance Avatar Property & Casualty Insurance Cooperativa de Seguros Multiples de PR Sunshine State Insurance 10/16/2009 3/1/ % 14.70% 10/16/2009 1/15/ % 13.10% 10/19/2009 1/17/2010 New 3/17/2010 Ren 40.20% 14.90% 10/23/2009 2/1/ % 11.70% Pending Gulfstream Insurance 10/24/2009 1/1/ % 3.70% Pending Pending Pending Pending Sawgrass Mutual Insurance Cincinnati Indemnity Cincinnati Insurance People's Trust Insurance Fidelity Fire and Casualty Insurance First Protective Insurance 10/30/2009 1/30/2010 N/A 0.80% 11/3/2009 4/1/ % 10.80% 11/3/2009 2/3/ % 14.90% 11/4/2009 2/15/ % 9.30% 17.8% (17.3% non-fhcf) reinsurance cost. HO-3: 33.5% non-hurricane % (18.71% non-fhcf) reinsurance cost HO-3: 21.7% (22.2% non-fhcf) reinsurance cost, 15.1% nonhurricane. HO-2/3: 30.3% (25.0% non- FHCF) reinsurance cost, 23.6% non-hurricane. Includes wind mitigation discount offset. Limited Reinsurance Filing. HO- 3: 29.03% reinsurance cost. Adopt revisions made by Tower Hilll Select. HO-2,3,5: 30.6% (28.9% non- FHCF) reinsurance cost, 58.0% non-hurricane 45.2% (35.7% non-fhcf) reinsurance cost, HO-3: 27.7% non-hurricane. 23.5% (149% non-fhcf) reinsurance cost, HO-2,3: 21.7% non-hurricane Pending Hartford the Midwest 11/6/2009 3/9/ % 7.90% HO-2,3: 25.2% reinsurance cost Pending Pending Northern Capital Insurance Homewise Insurance Homewise Preferred Insurance 11/6/ /30/2009 N/A N/A 11/9/2010 3/1/ % 14.90% Initial filing for Select HO Program. 27.0% (19.0% non- FHCF) reinsurance cost. HO-3: 23.4% (20.9% non-fhcf) reinsurance cost, 64.5% nonhurricane. Proprietary & Confidential Page 12

13 File Log Date Effective Change Change Change Date Number 1 Status 2 Name Filed 3 Date 4 Indicated Requested Approved Notes 5 Approved 6 American Strategic Insurance Limited Reinsurance Filing. 1/1/2010 New 69.1% reinsurance cost of Pending ASI Assurance Corporation 11/10/ % 6.60% 3/1/2010 Ren reinsurance as % of hurricane ASI Preferred Insurance premium. Corporation Pending Universal Property and Casualty Insurance Co 11/13/2009 2/19/2010 New 4/19/2010 Ren 9.20% 3.80% Rating algorithm change and Wind Premium Modifier (applicable to Windstorm Loss Mitigation Credits). 32.8% (31.9% non-fhcf) reinsurance cost Pending Service Insurance 11/13/2009 3/1/2010 N/A -0.20% Wind mitigation discount offset Pending Cypress Property and Casualty Insurance Co 11/14/2009 2/15/ % 14.30% HO-3: 28.4% (23.5% non-fhcf) reinsurance cost, 29.6% nonhurricane. NOTES: Aon Benfield has attempted to gather information pertaining to Florida rate filings from publicly available sources. Under no circumstance does Aon Benfield represent or warrant the accuracy or completeness of the information contained herein. 1 File Log Number is the number assigned by the Florida Office of Insurance Regulation (OIR). 2 Status is that shown in the OIR's Industry Portal as of November 16, Date Filed is the date shown in the OIR's Industry Portal. It may not match the date of the filing letter from the company. 4 Effective Date is that requested by the company in their filing letter for pending filings. Approved filings show the effective dates approved by the OIR. 5 Notes are based on information contained within the filing. In some cases, judgment was used to select information where there was conflicting information. 6 Date Approved is the date of the approval letter from the OIR. SOURCE: Florida OIR at Proprietary & Confidential Page 13