KBRA assigns a BBB insurance financial strength rating (IFSR) to Loggerhead Reciprocal Interinsurance Exchange. The Outlook is Stable. Previously, the BBB IFSR was preliminary and unpublished since July 21, 2022. Loggerhead Reciprocal Interinsurance Exchange (“Loggerhead” or “the Company”) is a de novo reciprocal exchange recently established to write homeowners’ insurance in Florida.

The rating reflects Loggerhead’s low underwriting leverage and significant surplus relative to projected premiums written. The rating also reflects a favorable market opportunity due to the company entering a sector with declining private market capacity. In addition, as a start-up insurer, Loggerhead has no legacy liabilities. Loggerhead will have the benefit of manageable start-up expenses due to an organizational structure whereby the Attorney-in-Fact will incur the majority of start-up costs. Further, KBRA views the company’s business plan as reasonable, with a management team that has considerable experience in the Florida homeowners’ insurance market.

Balancing these strengths is the company’s high financial leverage due to its entire surplus base consisting of a $30 million surplus note. Furthermore, as a Florida homeowners’ writer, the company will have product and geographic concentration, natural catastrophe exposure due to hurricanes, and high reinsurance dependence that, depending on the availability and affordability, could materially impact results of reinsurance. Lastly, as a de novo start-up, Loggerhead’s future profitability is uncertain and dependent upon management executing its business plan.

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Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

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Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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