AM Best withdrew its financial strength rating for Capacity Insurance, a commercial insurer with a small footprint in Florida, and the company decided to withdraw from the Florida market.
“Due to various circumstances, the Florida market has undergone tremendous change over the past year. As a result, we have discontinued binding new cases effective June 21, 2022,” Capacity’s website reads.
Since 1989, the insurer has provided property damage coverage for light businesses, offices, lessor’s risk, gas stations, places of worship, commercial contractors, funeral homes and other small and medium businesses.
In 2009, Capacity was acquired by Team Focus Insurance Group, which was acquired by Peak6 InsurTech and an investment company a year ago. Capacity’s affiliate and general management agency, MacNeill Group, continues to work with other carriers, the company’s website says.
AM Best announced on Thursday that it has withdrawn Capacity’s financial ratings after the company said it no longer wanted to participate in the ratings process. The rating firm recently downgraded Capacity’s financial strength rating to “C++ marginal” and said the company’s outlook was negative.
The downward revisions reflect Capacity’s balance sheet and “adverse development” in its capitalization, as well as the erosion of its surplus.
“In addition, the company’s capital structure is dependent on a $7 million surplus note (maturity 2029) that was issued in early 2022,” AM Best wrote in the press release. “The company continued to report unfavorable loss reserve developments resulting primarily from management’s efforts to correct current reserves and contain future deficiencies.”
Recent corrective actions taken by the company have not resolved the issue, noted AM Best.
A Peak6 spokesperson said on Friday that the insurer had undergone significant changes over the past 18 months. “Over the past year, the Florida market has been extremely difficult, particularly in the reinsurance area, which has further reduced Capacity Insurance’s profitability,” a company statement said.
On July 5, Capacity’s board accepted the resignation of its chairman and appointed Andy McGuire to the position. He also authorized management to move forward with the state’s voluntary withdrawal plan. Two days later, he submitted a withdrawal plan to the Florida Office of Insurance Regulation and is awaiting review. The carrier has agreed to pay all outstanding claims from its existing business volume, the company said.
The capacity is only about 2,700 in-force policies. In 2019, it had about $17 million in direct written premiums, less than 0.1% of the Florida market, according to a report by consultant Guy Fraker.
“PEAK6 InsurTech continues to view capacity assurance as an asset and will retain its write license in Florida so that it can re-examine opportunities to re-enter the Florida market for all lines of coverage in the future,” the report said. release from Peak6.
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