There are several factors to review when determining the stability of an insurer. Here is a brief version of what to look for in a company you are considering as your insurance carrier:
Reserves (in millions of dollars): Florida regulators believe insurers need at least $10 million set aside for emergencies. Less than that pushes companies into the red zone. Other experts argue companies need as much as $25 or $50 million to safely operate in Florida.
Risk-to-capital (regulatory score): This measurement uses a formula to compare assets to a company’s risk. The more risk — from market investments or from policies written — the more money and other assets are needed to offset it. The higher the score, the better. A score below 200 prompts regulatory intervention. Some experts say a score of 300 or less raises concerns.
Leverage (dollars per $100,000 insured): Some experts frown on companies that have less than $100 set aside for every $100,000 in property they insure. The more they have, the less likely they are to have cash-flow problems.
South Florida risk (percentage of business in south Florida): Too many policies in one place is dangerous, especially if they are in hurricane-heavy South Florida. Companies with more than 39 percent of their business in South Florida have more concentrated risk than Citizens Property Insurance, the state agency set up to cover houses deemed too risky by private insurers.
Experts agree that this information cannot determine if a company will fail but it can give you the consumer an overall view of the company’s financial situation.
NOTE: The answers to coverage questions are primarily based on ISO forms generally used in Florida by most companies. However, please keep in mind that all companies’ forms are NOT necessarily the same. Some companies may provide broader coverage and some may be more restrictive.
IN ALL CASES, THE CONSUMER MUST REFER TO HIS OR HER OWN POLICY FOR SPECIFIC COVERAGE INFORMATION.
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