OFFICE OF INSURANCE REGULATION

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FINANCIAL COMMISSION CHARLIE CRIST GOVERNOR SERVICES OFFICE OF INSURANCE REGULATION ALEX SINK CHIEF FINANCIAL OFFICER BILL McCOLLUM ATTORNEY GENERAL KEVIN M.

1 FINANCIAL COMMISSION CHARLIE CRIST GOVERNOR SERVICES OFFICE OF INSURANCE REGULATION ALEX SINK CHIEF FINANCIAL OFFICER BILL McCOLLUM ATTORNEY GENERAL KEVIN M. MCCARIY COMMISSIONER CHARLES BRONSON COMMISSIONER OF AGRICULTURE July 1, 2009 The Honorable Bill Proctor Florida House of Representatives 222 The Capitol 402 South Monroe Street Tallahassee, FL Dear Representative Proctor: Thank you for your May 29 correspondence. I applaud your commitment to helping solve the problems confronting the Florida property insurance market. Rather than continuing to send letters back and forth, I would like to meet with you in person this summer. While we share a common philosophy of maximizing private capital, I would like to convey some analysis and perspective about my experiences with the Florida property insurance market. Please refer to the enclosed spreadsheet which includes responses to the questions from your May 29 letter: (1) With regard to the "40 new property insurance writers with more than $4 billion in capital since 2006," is a statement supporting this report available? Please send me a list of the 40 new property writers licensed her in Florida since 2006 and indicate next to each one the amount of capital attributable to each and the date they were authorized to do business in Florida. AI) The Office ofinsurance Regulation (Office) prepared a list of 54 companies that began operations or expanded into the residential lines of business since 2006; there were 14 new insurers in 2006 and an additional 40 since Included with the list of companies is the initial licensure date and their initial capital investment amounts, as you requested. It should be noted the list represents only a fraction of Florida insurers - many of whom have insured property risk in Florida for decades. There are actually about 200 property and casualty companies licensed to write residential policies in Florida. The references to these new companies has been to illustrate that even after the 2004 and KEVIN M. McCARTY. COMMISSIONER 200 EAST GAINES STREET. TALLAHASSEE, FLORIDA (850) FAX (850) WEBSITE: KEVIN.MCCARTY@FLOIR.COM Affirmative Action / Equal Opportunity Employer

The Honorable Bill Proctor July 1, 2009 Page 2 00 2005 hurricane seasons, some investors still view Florida as a place to do business.

2 The Honorable Bill Proctor July 1, 2009 Page hurricane seasons, some investors still view Florida as a place to do business. It is not my intention to downplay the serious effects of State Farm's exit from the market and I do not mean to suggest that these new companies formed since 2006 will absorb all of the policies that State Farm plans to cancel. It is also worth noting that the probable maximum loss (PML) for Citizens as of December 31, 2008 has dropped 17% since last year and that their policy count is down around 1 million. While some companies have reduced their exposure due to the hurricane risk in coastal areas, only one national insurer has filed to completely withdraw from the marketplace. The reduction of risk by national carriers is not a phenomenon unique to Florida; in fact, insurance carriers have reduced coastal exposure from Maine to Texas, as evidenced by the need for residual markets in these states. Q2) To what extent is this capital a function of participation in the state's Capital Build- Up Program? When preparing the list requested in question # 1 please indicate next to each company the amount of their respective participation in the state's Capital Build-Up Program. A2) Technically this program is no longer in existence due to budgetary constraints. Only six companies that received capital-build up funds are on the list of newly licensed companies since 2006: American Capital Assurance, American Integrity, Royal Palm, Modem USA, Olympus Insurance Company and Privilege Underwriters Reciprocal Exchange. However, when the build-up program was in operation, there were several other existing companies that participated in the build-up program including, Cypress Property & Casualty, First Home, Florida Peninsula, Southern Fidelity, St. Johns, United Property & Casualty and Universal Property & Casualty. Please refer to the attached Insurance Capital Build-Up Incentive Program Final Report, which can also be found on the State Board of Administration's Web site under "Activity Summary" at Default.aspx. Q3) For each of the new companies, what is the number of homeowner's policies in force for each of the calendar years since their respective authorization dates? A3) The new admitted property and casualty companies reported slightly more than 650,000 personal and commercial residential policies in force in Florida as of December 31, In addition, the Florida Surplus Lines Service Office reported 1,158 personal and commercial residential policies in force for the new surplus lines companies during the same period. While these 650,000-plus policyholders are a significant portion ofthe market(andimpressivegiventhe severityof the stormseason)- our state does not rely heavily on this segment of the market.

- ~- - -- The Honorable Bill Proctor July I, 2009 Page 3 00 Q4) Are all 40 companies rated, and if so, what are their ratings and by what rating company are they rated?

3 - ~ The Honorable Bill Proctor July I, 2009 Page 3 00 Q4) Are all 40 companies rated, and if so, what are their ratings and by what rating company are they rated? A4) The Office obtained all ratings given to the companies by two separate rating organizations: Demotech and A.M. Best. As you may notice, all companies received an "A" rating with the exception of a "B++" rating awarded to Prime Insurance Company by A.M. Best. Prime Insurance is a surplus lines company and is thus subject to different licensing and regulatory requirements. Q5) Does the rating company(s) charge a fee for the service? A5) The answer is "yes," rating organizations do charge a fee. Similar to the banking industry, insurance companies are charged a fee for being evaluated and rated by Demotech and A.M. Best. Q6) & Q7) How many of the 40 companies have MGA's [sic], and what is the limitation on the transfer of assets to a company's MGA. Are the assets transferred to an MGA isolated from a company's claims-paying obligations? A6 & A7) The names of the MGAs and their affiliations are noted on the attached spreadsheet. In closing, I would like to open up a dialogue with you and would like to plan a visit to your district office, so we can discuss all of these issues in person. If you are amenable, I will ask my staff to contact you to schedule time for this meeting. As always, I am available to speak with you at (850) ~Kevin M. McCarty Florida Insurance Commissioner CC: The Honorable Charlie Crist The Honorable Mike Bennett

4 FINAL REPORT Insurance Capital Build-Up Incentive Program ( As Of 6/28/07) $ Amount $ Amount Total $ Estimated Date Application Date $ Date $ Surplus Contributed Amount Total # Companies that received a Surplus Note: Received Requested* Disbursed** Note by Insurer New Capital New Policies 1.) American Capital Assurance Corp 06/29/ /31/ /21/2006 $25,000,000 $25,000,000 $50,000,000 67,203 2.) American Integrity Insurance Co. of Florida 05/25/ /29/ /27/2007 $7,000,000 $7,000,000 $14,000, ,000 3.) Cypress P&C 06/30/ /01/ /02/2007 $20,500,000 $20,500,000 $41,000,000 95,000 4.) First Home Insurance Company 01/22/ /31/ /27/2007 $14,500,000 $29,000,000 $43,500,000 59,600 5.) Florida Peninsula Insurance Co. 06/16/2006 Revised 11/01/ /03/2007 $25,000,000 $25,000,000 $50,000, ,000 6.) Modern USA 05/25/ /01/ /28/2007 $7,000,000 $7,000,000 $14,000,000 59,964 7.) Olympus Insurance Co. 04/25/ /31/ /28/2007 $16,500,000 $33,500,000 $50,000, ,000 8.) Privilege Underwriters Reciprocal Exchange 12/06/2006 Revised 06/30/ /13/2007 $17,000,000 $34,000,000 $51,000,000 3,500 9.) Royal Palm Insurance Co. 06/27/ /01/ /20/2006 $25,000,000 $25,000,000 $50,000, , ) Southern Fidelity Insurance Co. 06/14/ /01/ /12/2006 $25,000,000 $25,000,000 $50,000,000 86, ) St. Johns Insurance Co. 06/15/ /25/ /31/2006 $20,000,000 $20,000,000 $40,000, , ) United P & C 06/16/ /01/ /22/2006 $20,000,000 $20,000,000 $40,000, , ) Universal P & C 06/15/ /01/ /09/2006 $25,000,000 $25,000,000 $50,000, ,000 Total Requested $247,500,000 $296,000,000 $543,500,000 1,713,135 Companies that did not pursue a Surplus Note: $ Requested Florida Family Insurance Co. 06/30/2006 $25,000,000 01/01/2007 Homewise Insurance Co. 06/30/2006 $20,000,000 09/15/2006 Security First Insurance Co. 05/24/2007 $15,000,000 06/30/2007 Sunshine State Insurance Co. 10/26/2006 $14,200,000 03/31/2007 Companies that applied but were not eligible: Homeowners Protection Insurance Corporation 05/01/2007 Magnolia Insurance Company 05/18/2007 Seaside Property Insurance Inc. 06/15/2006 Total Appropriated $250,000,000 Less: 1% Administrative Expenses $2,500,000 Total Available to Applicants $247,500,000 Total Disbursed to Date $247,500,000 Total Available Remaining $0 Additional Requested $0 Amount Over- Requested $0 * Date Requested indicates "no later than" **Amount disbursed = amount requested unless otherwise indicated

5 Property Writers New to Florida Since January 1, 2006 Licensed Since 1/1//2006 Initial Capital Demotech AM Best Policy Count as of Name Initial Licensure Line of Business ($millions) Rating Rating December 31, 2008 MGA Name Affiliated SAFE HARBOUR UNDERWRITERS, American Captial Assurance Corp 6/30/2006 Homeowners $49 A 1,427 LLC American Integrity Insuarnce Co. of Florida 9/13/2006 Homeowners $14 A 90,740 AMERICAN INTEGRITY MGA, LLC Ameriprise Insurance Co. 10/10/2006 Homeowners $48 A NONE Auto Club Insurance Co. of Florida 11/22/2006 Homeowners $10 A 2,240 NONE Edison Insurance Co. 1/4/2006 Homeowners $5 A 28,491 EDISON INSURANCE UNDERWRITERS, LLC Homewise Preferred Insurance Co. 5/31/2006 Homeowners $9 A 46,557 HOMEWISE MANAGEMENT COMPANY IDS Property Casualty Insurance Co. 3/15/2006 Homeowners $542 A 3,667 NONE NORTHERN CAPITAL Northern Capital Insurance Co. 5/4/2006 Homeowners $8 A 37,117 MANAGEMENT Ranchers and Farmers Insurance Co. 1/6/2006 Homeowners $8 A 1 SOUTHEAST SURPLUS UNDERWRITERS GENERAL Royal Palm Insurance Co. 3/31/2006 Homeowners $86 A 124,093 ROYAL PALM INSURANCE MANGERS TOWER HILL INSURANCE GROUP NO Safe Harbor Insurance Co. 5/4/2006 Homeowners $6 A 9,973 CABRILLO GENERAL INSURANCE AGENCY, INC NO TOTAL AUTHORIZED $785 Line of Business Added Since 1/1/2006 Name Added on: Line of Business American Vehicle Insurance Co. 8/18/2006 Homeowners A ASSURANCE MANAGING GENERAL AGENTS, INC. Surplus Lines Eligible Since 1/1/2006 American Modern Surplus Lines Insurance Co. Homeowners/Commercial 8/1/2006 Residential $18 Tower Insurance Company of New York Homeowners/Commercial 11/22/2006 Residential $138 TOTAL SURPLUS LINES $156 Licensed Since 1/1/2007 Initial Capital Demotech Policy Count as of Name Initial Licensure Line of Business ($millions) Rating AM Best RDecember 31, 2008 MGA Name Affiliated PRIVILEGE UNDERWRITERS RECIP EXCHANGE 1/23/2007 Homeowners $51 A 2,275 AMERICAN KEYSTONE INSURANCE COMPANY 2/8/2007 Homeowners $9 A 6,662 Kings Bay Insurance Service Yes HOMEOWNERS CHOICE PROP & CAS INS CO 5/10/2007 Homeowners $15 A+ 65,949 Homeowners Choice Managers, Inc Yes MODERN USA INSURANCE COMPANY 5/31/2007 Mobilehome $14 A 18,577 Musa MGA, LLC Yes OLYMPUS INSURANCE COMPANY 5/31/2007 Homeowners $50 A 28,495 Olympus MGA Corporation Yes AMERICAN COASTAL INSURANCE COMPANY 6/21/2007 Commercial Resid $50 A+ 1,474 AmRisc LP Yes MAIN STREET AMERICA PROTECTION 10/9/2007 Homeowners $10 A NORTHERN CAPITAL SELECT 10/19/2007 Homeowners $9 A 10,414 Northern Capital Management Yes CAM PROPERTY SELF-INSURANCE FUND 10/31/2007 Commercial Resid ARK ROYAL INSURANCE COMPANY 11/9/2007 Homeowners $10 A+ 2,684 Ark Royal Underwriters, Llc Yes PALM BEACH WINDSTORM SELF INS TRUST 1/16/2008 Commercial Resid Targa No PEOPLE'S TRUST INSURANCE COMPANY 3/6/2008 Homeowners $10 A+ 20,539 People's Trust MGA, Llc Yes AVATAR PROPERTY & CASUALTY INS. CO. 4/14/2008 Homeowners $10 A+ 1,238 Avatar Management, Llc Yes ASI PREFERRED INSURANCE CORP. 4/14/2008 Homeowners $10 A - 10,120 ASI Underwriters Yes MAGNOLIA INSURANCE COMPANY 4/28/2008 Homeowners $20 A+ 100,275 Magnolia Agency, Llc Yes ACE INS COMPANY OF THE MIDWEST 7/10/2008 Homeowners $50 A+ INFINITY PROPERTY & CASUALTY INS. CO., INC. 12/2/2008 Homeowners $10 Universal Risk Advisors, Inc Yes TOTAL AUTHORIZED $328 Line of Business Added Since 1/1/2007 Name Added on: Line of Business OCEAN HARBOR CASUALTY INSURANCE CO 2/14/2007 Homeowners National City Service Agency, Inc No AMERICAN MODERN INSURANCE CO OF FL 3/20/2007 Mobilehome 12,714 GREAT DIVIDE INSURANCE COMPANY 11/19/2007 Homeowners A+ SAFEWAY PROPERTY INSURANCE COMPANY 11/19/2007 Homeowners A 31,774 FIDELITY NATIONAL INSURANCE COMPANY 1/22/2008 Commercial A GENERAL FIDELITY INSURANCE COMPANY 3/12/2008 Commercial A - WESCO INSURANCE COMPANY 4/10/2008 Commercial A - Crump Insurance Services, Inc No Member Insurance Agency, Inc. No Synergy Coverage Solutions Llc No Risk Insurance Services Agency Llc No Advantage Comp Inc No International Excess Program Mgrs No Mckee Risk Management Inc No Oryx Insurance Brokerage Inc No Program Brokerage Corporation No NATIONWIDE INSURANCE CO OF AMERICA 4/17/2008 Commercial A+ FARMERS INSURANCE EXCHANGE 9/9/2008 Commercial/Commercial Resid. A MID-CENTURY INSURANCE COMPANY 9/9/2008 Commercial/Commercial Resid. A

6 TRUCK INSURANCE EXCHANGE 9/9/2008 Commercial/Commercial Resid. A Surplus Lines Eligible Since 1/1/2007 Name Added on: Line of Business PRAETORIAN SPECIALTY INSURANCE COMPANY 3/30/2007 Commercial $31 ARCH INSURANCE COMPANY (EUROPE) LIMITED 5/10/2007 Commercial $103 A IRONSHORE INSURANCE LTD. 5/17/2007 Commercial $930 A - AIX SPECIALTY INSURANCE COMPANY 7/2/2007 Commercial Resid $15 A - LANCASHIRE INSURANCE COMPANY LIMITED 7/2/2007 Commercial/Commercial Resid $1,130 A - USF INSURANCE COMPANY 7/3/2007 Commercial $43 A - CATLIN INSURANCE COMPANY (UK) LTD. 1/31/2008 Homeowners $168 A LANCASHIRE INSURANCE COMPANY (UK) LTD. 5/1/2008 Commercial/Commercial Resid $113 A - COMPANION SPECIALTY INSURANCE COMPANY 9/18/2008 Commercial/Commercial Resid $25 A ARCH EXCESS & SURPLUS INSURANCE CO. 10/9/2008 Commercial $26 A OMEGA US INSURANCE, INC. Homeowners/Commercial/Comme 10/16/2008 rcial Resid $45 A - SIRIUS INTERNATIONAL INSURANCE CORP 10/31/2008 Commercial/Commercial Resid $1,209 A TOTAL SURPLUS LINES $3,838 Applications Pending as of 1/6/2009 Name Line of Business PRIME INSURANCE COMPANY Homeowners/Commercial $32 B++ Evolution Underwriting Service, Inc Yes EMPIRE NATIONAL INSURANCE COMPANY Homeowners $10 FLORIDA TROPICAL INSURANCE COMPANY Homeowners/Commercial Resid $13 NORTH AMERICAN ELITE INSURANCE COMPANY Commercial $35 A A Source: OIR Applications Records - CORE 1/6/2009 Total New Capital: $4,951

South Florida Property Insurance

South Florida Property Insurance Market share changes June 30, 2017 to June 30, 2018 Policy totals are commercial and residential multiperil and wind only Source: Florida Office of Insurance Regulation