The California Department of Insurance is working on rate filings to transition Civil Service Employees Insurance Co.(CSE) homeowners and personal automobile policyholders to comparable policies, according to spokesman Michael Soller.
CSE informed the department last year it planned to leave the market. He said CSE held less than a 0.4% share of the homeowners market and a 0.2% share of the private-passenger auto market in California.
CSE Insurance Group, a Société de Groupe d’Assurance Mutuelle Covéa subsidiary, has effectively been placed into runoff, according to AM Best.
Following CSE Group’s decision to exit the market and no longer write new business as of Oct. 9, 2023, as well as nonrenew existing business over the next 12 months, the group’s business profile is assessed as very limited based on material changes in business strategy, product offerings and earnings capacity, AM Best said.
“Although the group currently maintains the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio, policyholders’ surplus has continued to decline, down 25% through the first six months of 2023, due to significant underwriting losses. In addition, the balance sheet strength assessment also reflects inconsistent loss reserve development, negative operating cash flow and declining admitted assets to fund operational needs,” it added.
Earlier, AM Best said CSE Group’s significant geographic concentration in California exposed it to “regulatory, legislative and judicial challenges, as well as consequential weather events” that were negatively impacting operating performance.
Management implemented many corrective actions to improve underwriting performance but results remained marginal, AM Best said at the time, impacted by winter storms, an increase in large losses and inflationary impacts, as well as delays in regulatory approval of needed rate increases.
“In addition, reinsurance market pricing has offset gains made in reducing the group’s exposure to catastrophe losses,” it said.
Porch Group Inc. had agreed in September 2021 to a $48.6 million deal to acquire CSE from parent Covéa. They mutually agreed 11 months later to terminate the sale.
Several carriers are limiting or exiting business in California.
Berkshire Hathaway subsidiary AmGuard Insurance Co. and James River subsidiary Falls Lake Fire and Casualty Co. are exiting homeowners.
Tokio Marine America plans to exit all personal lines in the state and will stop writing new non-automobile personal lines this month, the company said recently.
And three of California’s top-five homeowners’ insurers have closed or limited access to new policyholders: top writer State Farm, Allstate and Farmers — which noted record-breaking inflation, higher reconstruction costs and the impact of severe weather events when it said it would limit new policies in the line in its home state.
AM Best downgraded this month the Best’s Financial Strength Rating to B (Fair) from B+ (Good) and the Long-Term Issuer Credit Ratings to “bb” (Fair) from “bbb-” (Good) of CSE and CSE Safeguard Insurance Co., which together comprise CSE Insurance Group. The outlook of the Credit Ratings is negative.
Concurrently, AM Best withdrew the ratings as CSE Group requested to no longer participate in AM Best’s interactive rating process.