State Farm enters Florida E&S homeowners platform

State Farm’s E&S platform Dover Bay Specialty Insurance Company has begun underwriting in Florida as the US insurance giant looks to broaden its offering in the Sunshine State to coastal areas it had retreated from in the last decade, The Insurer can reveal.

Dover Bay, which is 100 percent owned by State Farm Mutual Automobile Insurance Company, brings AM Best A rated non-admitted paper to the homeowners market in the state.

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According to Dover Bay’s website, it offers homeowners insurance to customers in coastal areas where options aren’t available.

A State Farm spokesperson confirmed the move to offer homeowners insurance in eligible coastal areas.

They said the move: “Provides the State Farm group with more flexibility in underwriting new business in areas where customers are not able to readily obtain homeowners insurance in the admitted market which will allow us to better serve their insurance needs.”

Although it is not known how much business is being written at this stage, the subsidiary officially began operations in Florida in August.

Illinois-domiciled Dover Bay, which was launched in 2016, already operates in Louisiana, Alabama and South Carolina.

Last year the platform put a modest amount of business on its books, with just $7.2mn of direct written premium (DWP).

It had only $50.7mn of capital at 31 December 2018 but does have access to a $500mn credit line if needed from its parent, according to the latest AM Best report on Dover Bay.

The platform offers a standard homeowners policy and a basic homeowners policy with more limited coverage at a lower premium.

Dover Bay policies are sold by the same agency force as the State Farm group and use a third party administrator for premium collection and policy administration.

Risk on in Florida?

State Farm is by far the biggest homeowners insurer in the US with direct written premiums of $18.2bn in 2018, for an 18.4 percent market share – more than twice the 8.4 percent share of Allstate and almost three times Liberty Mutual’s 6.7 percent share.

But the company, which had also been Florida’s largest property insurance company, has for a long-time had an on-off relationship with the Florida homeowners’ sector and state regulators.

In the five years to the end of 2010 the company shed more than 850,000 Florida homeowners policies as it retrenched from coastal property risks, and looked to stop writing new business and push for big rate increases on renewal business.

At the time it said the move was related to its inability to secure regulatory approval for the rate increases it needed in the state to write on an admitted basis. It said that led to a “weakened financial position” for its State Farm Florida unit.

It does have exposure to coastal risk in the state however, through its longstanding relationship with RenaissnaeRe, including its investments in DaVinciRe and Top Layer Re, which are both married by the Bermudian reinsurer.

The insurer also signaled a return to writing new business in Florida in 2014 as it announced plans to offer new homeowners and renters policies for the first time since 2009 on an admitted basis.

And this year the giant mutual said its admitted State Farm Florida subsidiary would offer an average 14.4 percent rate decrease that would benefit more than 270,000 homeowners policyholders.

State Farm does not currently feature in the top 25 companies by Florida personal and commercial residential market share featured on the website of the Florida Office of Insurance Regulation because it is one of several carriers whose data has been filed as a “trade secret” according to the regulator.

But a book of 270,000 policies would place State Farm as the third biggest Florida homeowners writer after Universal and state-backed Citizens.