Phil Bowie, CEO of Velocity Risk Underwriters | State of Florida
National Specialty Insurance Co., which operates Velocity Risk Underwriters, received approval last month from the Florida Office of Insurance Regulation (OIR) for a 28.1% rate hike for its Homeowners Multi-Peril program.
The average premium cost will increase by $47 a month with this rate hike, compared to the $18 a month increase in 2018.
The company included two accident years in its filing for the rate changes, from April 1, 2017 to March 31, 2019. Because the company has a low volume of policies and has only operated this program for a short time, its analysis used competitor support data for the up-to-date and Projection Period trends.
“Many of you know Velocity came to the market with a unique business model," Phil Bowie, CEO of Velocity Risk Underwriters said at the Florida OIR hearing. "Our company was brought in to bring expertise and capital to difficult coastal markets, in particular Florida."
Velocity Risk serves as the managing general agency producing and underwriting risk on behalf of National Specialty.
Bowie told the hearing panel the focus of the rate filing centered on the catastrophe loading methodology.
“The filing is not centered on the (assignment of benefits) and all the other parallel issues that have (been) prevalent in the previous rate hearings that we recently followed,” Bowie said. “Many in the marketplace are watching the Velocity business model, and they’re watching to see if a consistent return can be achieved in Florida.”
He said catastrophe reinsurance programs and their costs make up a significant part of Florida homeowners’ insurance programs today.
“Reinsurance plays a key role in providing capital and financial support to the ability of carriers to sell insurance to Floridians,” Peter Scourtis, a consulting actuary for Velocity Risk, said.
Robert Lee, an actuary with Florida OIR, asked the Velocity Risk representatives to document how much of the rate increase request was based on wind as opposed to other peril.
“The proposed rate changes in the filing are almost completely related to the wind peril,” Scourtis, a principal with Merlinos & Associates, said. “Overall we changed the wind rate 49.3% and minimal 1.9% on the other perils.”
Scourtis said the filing reflects a 29.6% overall wind-loss ratio, with the biggest change coming from non-hurricane wind. That resulted from the larger volume of policies the agency has written.
Velocity Risk’s Emily Henderson told Florida OIR Deputy Commissioner Susanne Murphy that 35,600 policyholders will be affected by the rate hike.
Henderson, the vice president of Personal Lines and Systematized Risk Portfolio manager, explained the wide difference in rate requests from 2018 when the panel asked for an 8.4% increase to the current 28.1% hike. She said the higher request was made to maintain the health of the program and to continue to bring in the capital supporting it.
Scourtis said reinsurers support the entire health of the program and not just hurricane coverage.
Reinsurers want the company’s competitive position to be better than it is, Bowie said. Reinsurance is 100% of the company’s corporate structure.
Henderson said insurance retailers will earn 12% for new policies and 10% on renewals.
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