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Insurance, the wise way

It's small, but it's doing something larger companies aren't: writing property insurance policies in Florida.

By TOM ZUCCO, Times Staff Writer
Published March 10, 2007

Stay focused, don't bite off more than you can chew, and find a financial backer with deep pockets who's willing to take a hit once in a while.

If there is a formula to bring at least some property insurance companies back to the Florida market, that may be it.

Case in point: Tampa-based HomeWise Insurance.

Founded two years ago, HomeWise insures about 30,000 homeowners, condo-unit owners and renters in the state, mostly in South Florida. It doesn't sell auto, life or any other lines. A small company by industry standards.

But here's what sets HomeWise apart: HomeWise is still writing new business, albeit on a limited basis, and all of the policies include wind coverage.

Originally begun by two officials of state-backed Citizens Property Insurance as a company that did nothing but take on Citizens policies, HomeWise has cut back on its Citizens business, moved into the open market, and the Citizens officials have since left both companies.

Dale Hammond spent nearly three decades with Travelers Insurance before he became CEO of HomeWise. Hammond, 59, answered questions recently about how his company is surviving in what many consider America's riskiest property-insurance market.

You just won a 75 percent average statewide rate increase through arbitration. Will your rates be so high hardly anyone can afford them?

Our rates are comparative with Citizens. In some cases more; some less. Right now, we're writing as much business as we want to write.

The assumption is that there's going to be a hurricane every single year. And there aren't. ... We could survive one or two storms in a year and still make money because we are very careful about what we write. ... We try to focus our writing in those areas where we can make money. We're not very big in Pinellas and Hillsborough.

You haven't taken any policies out of Citizens for almost a year, so you've shifted your attention, right?

We started writing voluntary business last November, and we're rapidly growing that part of the business. We have two companies: HomeWise Insurance is wind only, and HomeWise Preferred is a full homeowner product.

Why do you think other companies aren't writing in Florida?

I can only speculate, but there's a fairly complex national environment that's making a lot of companies unwilling to write in catastrophe-prone areas. The credit ratings from A.M. Best Co., Standard & Poor's and Moody's has gotten tough on businesses. We are not rated by Best, S&P or Moody. We're rated an A by Demotech.

The second, bigger issue for the Allstates and Travelers is the financial analysts looking at their debt issues and their stocks. They (insurers) take a pretty serious hit for writing an inordinate amount of catastrophe-exposed business. We are wholly owned by a private equity firm (Dallas-based HBK Capital Management) and we believe there are good profits to be made in the catastrophe-exposed property business.

Is HomeWise a blueprint for survival in the Florida market?

In the short and intermediate term. If you look at Allstate or Travelers, they expect a return of 13, 14, or 15 percent. Our expectations are 20 to 25 percent, but we know that in some years we might lose money or only make in the single digits. It's the appetite of the investors and the lack of pressure from the rating agencies that allows companies like HomeWise to start and stay in business.

Do you think the private market will come back?

Yes. It's not that the insurance industry doesn't know how to do this. There just have to be rates that are acceptable to the insurance-buying public. Rates will naturally, over time, go up. But they don't have to go up dramatically.

Tom Zucco can be reached at zucco@sptimes.com or (727)893-8247.

[Last modified March 10, 2007, 00:13:20]