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Agency lowers rating on Florida home insurer

By BAIRD HELGESON | The Tampa Tribune

Published: August 27, 2009

TAMPA - One of the nation's top insurance-rating agencies has serious doubts that a longtime Florida-based insurer will be able to pay claims if more than one major hurricane hits the state this year.

A.M. Best downgraded the financial strength of Tower Hill Insurance Group two levels, from fair to poor.

Best's analysts said the Gainesville-based company doesn't have enough reinsurance, which insurers buy to pay claims in the event of major disasters.

"It's a fundamental disagreement between us and A.M. Best in capital management," said Don Matz, president of Tower Hill.

The insurance group, which includes three Tower Hill companies and Omega Insurance Co, have 254,000 policies in Florida, according to the Florida Office of Insurance Regulation.

Tower Hill is actually in a better position to pay claims after a disaster than other insurers, Matz said Thursday.

Many insurers buy disaster coverage from the state-backed Florida Hurricane Catastrophe Fund, which offers insurers cheaper backstop coverage than they could buy in the private market.

Some analysts say the state's catastrophe fund might not have the money to pay claims after a bad hurricane season. That could lead to the need for a federal bailout and delays paying claims.

Tower Hill decided to buy $850 million in reinsurance in the private market, which is more expensive but guarantees the money is available when needed.

The company did not meet A.M. Best's requirement that insurers buy enough reinsurance to cover anticipated losses from two mega hurricanes in the same season, the kind that hit once every 100 years.

Despite grim assessment from A.M. Best, Tower Hill holds a Demotech Inc. financial stability rating of 'A,' which is considered exceptional.

Reporter Baird Helgeson can be reached at (813) 259-7668.

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