New property insurer approved to enter Florida’s troubled market

Tailrow Insurance Company’s application to become an authorized domestic insurer and write homeowners multi-peril policies has been approved by the Florida Office of Insurance Regulation, the office announced in a news release Tuesday.

However, the new company won’t be writing policies before the June 1 start of hurricane season, and likely not until sometime before the end of the year, according to the CEO of its parent company.

Tailrow will be a fully-owned subsidiary of Tampa-based HCI Group Inc., a publicly-traded company formed in 2006 just as heavy financial losses from the 2005-2006 hurricane season prompted numerous well-known national carriers to reduce or cease operations in the state.

HCI Group also owns Homeowners Choice Insurance, TypTap Insurance Co., Exzeo, an insurance technology solutions provider, Greenleaf Capital, a real estate manager and developer, and reinsurance provider Claddaugh.

Tailrow will be a new entity, meaning it won’t be burdened with unresolved litigation filed before the Legislature outlawed one-way attorney fees, assignment of benefits and other practices blamed for five years of cumulative financial losses and dissolution of seven state-regulated carriers since 2020.

Because of the reforms, the new company also won’t face the same litigious environment going forward that continues to burden competitors and drive up homeowner premiums, said Mark Friedlander, director of corporate communications for the industry-funded Insurance Information Institute.

Industry officials are hoping that reforms passed last year would “create a path toward stability” for the overall market, Friedlander said.

Market stability, he pointed out, “includes new insurers entering the state, creating more options for consumers to shop their home coverage, which drives competitive pricing.”

In a news release about the approval, Insurance Commissioner Michael Yaworsky pointed out that the Office of Insurance Regulation would “continue to use all available resources to attract more insurance-related companies, jobs and capital to the Florida insurance market.”

Those resources, office spokeswoman Samantha Bequer said in an email, include speaking engagements and other external outreach, speeding up reviews of required filings, streamlining “one of the most sophisticated regulatory technology systems in the country, and providing guidance on what impacts insurers can expect from newly enacted reforms.

“OIR is always working to attract more insurance-related companies, jobs and capital to the Florida insurance market,” Bequer said.

While the legislative reforms will help stabilize the insurance market in Florida, they were not the sole or even primary reason that Tailrow was founded, HCI Group CEO Paresh Patel said in an interview Tuesday.

Plans for Tailrow, he said, were in the works prior to the two special legislative sessions in May and December that pledged state money for additional reinsurance and enacted restrictions on how much money plaintiffs attorneys could recover for initiating litigation.

In April 2022, HCI Group raised $172.5 million in investment capital for general corporate purposes. Some of that money helped offset $55 million in losses in 2022 that were largely caused by Hurricane Ian. But much of it — Patel said the amount has not yet been publicly disclosed — will be used to launch Tailrow.

HCI Group has been seen as one of the more successful of home-grown companies formed since the 2005-2006 hurricanes. Patel has been chairman since its founding.

While many insurers have reduced their policy counts in recent years, the combination of policies held by Homeowners Choice and TypTap has grown, from 130,496 at the end of 2019 to 150,241 at the end of 2022.

Although the two companies have been “closed for business” since Hurricane Ian, Paresh said he expects Tailrow to write new policies in oft-shunned South Florida. “I see no reason why not,” he said.

But the company is several important steps away from opening for business, Patel said. It still must file rates and forms and get them approved by the Office of Insurance Regulation. It must be approved by a financial strength ratings agency like Demotech or A.M. Best. It has to get its technology system in place and sign up agents.

Patel declined to comment about prospects for quickly populating Tailrow’s book of business by taking advantage of state-owned Citizens Property Insurance Corp.’s depopulation program as Homeowners Choice did when it opened for business in 2007. Taking policies out of Citizens is “always a possibility,” he said.

As for the name Tailrow, Patel said he heard a story — and doesn’t know whether it’s true — that “tail row” referred to the last row planted in a field of crops to protect the other crops. “I liked the idea that we are the last line of defense to the insured,” he said.

The company’s longevity and track record should increase odds of success for the startup, said Paul Handerhan, president of the consumer-focused insurance watchdog group, Federal Association for Insurance Reform.

“HCI has lots of Florida experience and financial resources, so they likely can get the reinsurance cover they need,” Handerhan said in an email. “Also, as a new company with no legacy claims, Tailrow gets to fully operate under the new legal framework. As long as they underwrite their risks appropriately and charge an adequate rate, I would imagine they will have a favorable experience.”

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at [email protected].

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