NEW YORK–(COMMERCIAL THREAD) – Kroll Bond Rating Agency (KBRA) assigns an insurance financial strength rating of BBB + with a stable outlook to Tower Hill Insurance Exchange (THIE). THIE was formed as a Florida reciprocal exchange and will begin purchasing residential property insurance in Florida in its first year of operation and will continue to expand into the Florida market over the next two years.
The rating reflects its strong initial capitalization, prudent investment portfolio and reasonable business plan. THIE will benefit from the established market presence, distribution and risk management of Tower Hill Insurance Group (Tower Hill) – a private organization comprised of three direct editors based in Florida, an affiliated offshore reinsurer, a general management agency (MGA), and two complaints service companies. Tower Hill is one of Florida’s largest residential property insurers with a market share of around 6%.
THIE’s exposure to natural disasters and a lack of geographic and product diversification strike a balance between these strengths. THIE’s revenue and profits are expected to be concentrated in Florida, a state exposed to both natural disasters and significant legal challenges for residential property insurers. In addition, the initial principal is funded solely by excess notes with annual interest charges of approximately $ 16 million. This is somewhat offset by the low start-up costs of THIE compared to more typical start-ups.
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