The Florida Office of Insurance Regulation (OIR) has approved residential property insurance rate hikes for Castle Key Insurance Co. and Castle Key Indemnity Co., both subsidiaries of Allstate. The OIR heard the rate requests at a public hearing on July 19 and issued its rulings today. Castle Key Insurance had requested an average rate hike of 31.2 percent; the OIR approved an increase of 14.1 percent. Castle Key Indemnity received the full 35.7 percent increase that it sought in its filing. The increases will take effect November 13 for both new and renewals business.

According to a report from the OIR, Florida's top personal and commercial residential property insurance writers ranked by in-force policies at the end of the first quarter of 2011 were:

1. Citizens Property Insurance Corp. with 1.28 million policies in force and a 21.1 percent market share
2. State Farm Florida Insurance Co.; 590,830; 9.7 percent
3. Universal Property & Casualty Insurance Co.; 582,422; 9.5 percent
4. St. Johns Insurance Co.; 172,897; 2.8 percent
5. USAA; 147,530; 2.4 percent
6. Castle Key Insurance Co.; 135,877; 2.2 percent
7. Castle Key Indemnity Co.; 129,787 2.1 percent
8. ASI Assurance Corp.; 119,798; 2.0 percent
9. Security First Insurance Co.; 119,205; 2.0 percent
10. American Integrity Insurance Co. of Florida; 102,091; 1.7 percent.

On August 26, A.M. Best Co. affirmed the financial strength rating of B- (Fair) and issuer credit ratings of “bb-” of Castle Key Group and its members headquartered in St. Petersburg; the outlook for all ratings was stated as “negative.” The Castle Key Group members are identified as Castle Key Insurance Co., Castle Key Indemnity Co., Encompass Floridian Insurance Co., and Encompass Floridian Indemnity Co.

In the rating affirmation, A.M. Best says, “The ratings and outlook reflect Castle Key's continued unprofitable operating performance and poor risk-adjusted capitalization, as measured by Best's Capital Adequacy Ratio. As Castle Key is the dedicated Florida property writer for its parent company, Allstate Insurance Co., it maintains significant exposure to hurricanes, with a corresponding substantial reliance on catastrophe reinsurance. In addition, the group's reinsurance program relies heavily upon the Florida Hurricane Catastrophe Fund (FHCF), including the purchase of Temporary Increase in Coverage Limits. As indicated, A.M. Best remains concerned regarding the ability of the FHCF to fund all obligations in the event of a severe hurricane, largely based on its contingent capital structure. This contributes to A.M. Best's negative view regarding the adequacy of Castle Key's catastrophe reinsurance program in the case of a significant catastrophe event.”