Credit rating agency KBRA has assigned Orange Insurance Exchange, a new Florida-based insurer, an Insurance Financial Strength Rating (IFSR) of BBB, and given it a Stable Outlook.
Launched in early November, Orange is a new domestic reciprocal property and casualty insurance company headquartered in Newberry, Florida.
Headed by Chief Executive Officer, Don Matz, it will write primarily personal lines residential business as well as commercial lines habitational business solely in the state.
According to KBRA, the assigned rating reflects Orange’s low underwriting leverage and significant surplus relative to projected premiums written. It also reflects a favourable market opportunity due to the company entering a sector with declining private market capacity.
Additionally, as a start-up insurer, Orange has no legacy liabilities. The insurer will have manageable start-up expenses due to an organisational structure whereby the Attorney-in-Fact (AIF) will incur the majority of start-up costs, KBRA explained.
Orange has entered the Florida insurance market with the mission of “providing a new alternative for property insurance policyholders.”
Its formation follows on from a challenging period of increased loss activity and excessive litigation in Florida, which created a “severely dislocated” insurance marketplace.
Following reforms enacted by the State of Florida, Orange is aiming to provide new insurance coverage options to policyholders, managed by industry-leading talent.
KBRA believes the company’s business plan as reasonable, with a management team that has considerable experience in the Florida homeowners’ insurance market. Balancing these strengths is the company’s high financial leverage due to its entire surplus base consisting of a $25 million surplus note.
Furthermore, as a Florida homeowners’ writer, Orange will have product and geographic concentration, natural catastrophe exposure due to hurricanes, and high reinsurance dependence that, depending on availability and affordability, could materially impact results.
As a new insurer, KBRA also noted, Orange’s future profitability is uncertain and dependent upon management executing its business plan.
