For some interesting reading about Magnolia Ins and Mr. Irl in particular, check out an article dated 11.23.08 in the St. Pete’s Times by Ivan Penn. Title: Past Suggests Insurer May Be Bit of a Risk. Makes me doubt Demotech’s rating and the Florida OIR’s decision making. But hey they wouldn’t be in the mess they are in in Florida if they hadn’t made Citizens the cheapest carrier vs. the private market.
I’ve already read this story and Mr. Irl’s personal issues have nothing to do with the company. He and his management team presented a business plan, capital, and a re-insurance plan to Demotech and requested a rating.
The fault here is not Demotech. They withdrew the rating as soon as it became clear there was a problem. I fault the depopulation program. Reinsurance for 100,000 plus policies is quite expensive. A company with $20 million probably shouldn’t be taking out 100,000 policies. Why not start with a smaller pool?
Mr Solvent, I’m sure you didn’t find a company on the Demotech list of Florida insurers with anything other than an A rating? I searched all there ratings A”, A’, A, S, M, L, IP, NR, NA. There were absolutely none rated anything but A or above.
That’s my point – the only companies on the list are those willing to pay for a sure A rating from Demotech. Since you mentioned them, Federated National is rated A by Demotech, too. Since they already paid for an A rating through Demotech, why would they need a downgraded AM best rating?
Demotech’s business model is set up so that if a company isn’t A rated, Demotech probably won’t make any money.
Mr Solvent, you have the benefit of being a knowledgebale insurance professional with a lot of years experience. You know how to look at the reinsurance agreements and financials and know what they mean.
How many of your clients are able to do that? Very few, I’d bet. And that’s exactly why I say that Demotech is misleading consumers with their A ratings system. Right now, every Florida company rated by Demotech is A rated or better. Every single one, and every single one of them has their primary layer of reinsurance purchased through the unstable Florida Cat Fund, and many have very small reserves. That’s misleading to consumers, but it’s valuable to agents who justify the sale of a second rate insurance product to unknowing consumers.
Once the big hurricane hits, consumers and mortgage companies are going to go after Demotech (and maybe agents, too) for their misleading ratings system which is giving them all a false sense of security.
Sometimes it gets very hard to tell clients why one “A” rated carrier is better than another with the same rating. I’ll concede that point to you. With that said, a company that comes to market with $20 million in surplus and a good business plan is not necessarily a higher risk to the consumer than a company with that same $20 million that’s been in business for years writing $200 million in premiums. 1:10 surplus to premium is on the brink of insanity.
One positive thing that can be said for Demotech is they very clearly put the financials in front of you and the customer so you can see surplus to premium written. You can also see the companies that are pumping a ton of money into their surplus as opposed to tapping into their surplus. I’ve just added a company to my agency that 5 years ago I may not have. Their financials over the past 36 months speak volumes to the commitment to the business and marketplace.
But, again, you’re an insurance pro with an ethical approach, providing the proper disclosure to your clients and understanding what surplus to premium means. I don’t expect that other agents or consumers really look at those or have a clue what they mean. The only thing that matters is that A rating. Consumers have no idea how it got there or what it takes to get an A rating, and most really don’t care. They rely on their agents to tell them that these companies are secure. They assume an A rating is the most secure thing out there. If I didn’t know better, I’d make the same mistake. Most agents I’ve met wouldn’t have a clue on where to find this information or even understand what it means.
Demotech… come on man!
All of these Florida start ups need to go. We need quality national carriers again to start writting. I dont know exactly what the answer is but I do know it is not Charlies plan to run off all good carriers.
Bill, I was wondering when you might chime in on this one. Again I’ll say, not all startup’s are bad…and not all Florida only carriers are bad. This discussion has been mostly limited to ratings agencies and this particular company. Remember they brought $20 million to market when the state only requires $5 million (which is asinine). I’ll say again that the fault has to lie with the state that allowed this or any startup with less than $100 million in surplus to take out that many policies.
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For some interesting reading about Magnolia Ins and Mr. Irl in particular, check out an article dated 11.23.08 in the St. Pete’s Times by Ivan Penn. Title: Past Suggests Insurer May Be Bit of a Risk. Makes me doubt Demotech’s rating and the Florida OIR’s decision making. But hey they wouldn’t be in the mess they are in in Florida if they hadn’t made Citizens the cheapest carrier vs. the private market.
I’ve already read this story and Mr. Irl’s personal issues have nothing to do with the company. He and his management team presented a business plan, capital, and a re-insurance plan to Demotech and requested a rating.
The fault here is not Demotech. They withdrew the rating as soon as it became clear there was a problem. I fault the depopulation program. Reinsurance for 100,000 plus policies is quite expensive. A company with $20 million probably shouldn’t be taking out 100,000 policies. Why not start with a smaller pool?
Mr Solvent, I’m sure you didn’t find a company on the Demotech list of Florida insurers with anything other than an A rating? I searched all there ratings A”, A’, A, S, M, L, IP, NR, NA. There were absolutely none rated anything but A or above.
That’s my point – the only companies on the list are those willing to pay for a sure A rating from Demotech. Since you mentioned them, Federated National is rated A by Demotech, too. Since they already paid for an A rating through Demotech, why would they need a downgraded AM best rating?
Demotech’s business model is set up so that if a company isn’t A rated, Demotech probably won’t make any money.
Mr Solvent, you have the benefit of being a knowledgebale insurance professional with a lot of years experience. You know how to look at the reinsurance agreements and financials and know what they mean.
How many of your clients are able to do that? Very few, I’d bet. And that’s exactly why I say that Demotech is misleading consumers with their A ratings system. Right now, every Florida company rated by Demotech is A rated or better. Every single one, and every single one of them has their primary layer of reinsurance purchased through the unstable Florida Cat Fund, and many have very small reserves. That’s misleading to consumers, but it’s valuable to agents who justify the sale of a second rate insurance product to unknowing consumers.
Once the big hurricane hits, consumers and mortgage companies are going to go after Demotech (and maybe agents, too) for their misleading ratings system which is giving them all a false sense of security.
Sometimes it gets very hard to tell clients why one “A” rated carrier is better than another with the same rating. I’ll concede that point to you. With that said, a company that comes to market with $20 million in surplus and a good business plan is not necessarily a higher risk to the consumer than a company with that same $20 million that’s been in business for years writing $200 million in premiums. 1:10 surplus to premium is on the brink of insanity.
One positive thing that can be said for Demotech is they very clearly put the financials in front of you and the customer so you can see surplus to premium written. You can also see the companies that are pumping a ton of money into their surplus as opposed to tapping into their surplus. I’ve just added a company to my agency that 5 years ago I may not have. Their financials over the past 36 months speak volumes to the commitment to the business and marketplace.
But, again, you’re an insurance pro with an ethical approach, providing the proper disclosure to your clients and understanding what surplus to premium means. I don’t expect that other agents or consumers really look at those or have a clue what they mean. The only thing that matters is that A rating. Consumers have no idea how it got there or what it takes to get an A rating, and most really don’t care. They rely on their agents to tell them that these companies are secure. They assume an A rating is the most secure thing out there. If I didn’t know better, I’d make the same mistake. Most agents I’ve met wouldn’t have a clue on where to find this information or even understand what it means.
Demotech… come on man!
All of these Florida start ups need to go. We need quality national carriers again to start writting. I dont know exactly what the answer is but I do know it is not Charlies plan to run off all good carriers.
These companies suck!
No they don’t.
Bill, I was wondering when you might chime in on this one. Again I’ll say, not all startup’s are bad…and not all Florida only carriers are bad. This discussion has been mostly limited to ratings agencies and this particular company. Remember they brought $20 million to market when the state only requires $5 million (which is asinine). I’ll say again that the fault has to lie with the state that allowed this or any startup with less than $100 million in surplus to take out that many policies.
I agree with you Bill, That is fine with me. I will take an A++XV best rated carrier over any of these fly by night carriers.
Oh now Solvent, you and I both know we are going to end up agreeing to disagree. So lets just leave it at that. LOL…
I think we can both agree that Charlie Crist is a RINO loser though. right?