Three property-casualty insurance companies with Gainesville, Fla.-based Tower Hill have been downgraded, A.M. Best Co. announced.

The action made public Monday changes the financial strength rating of Tower Hill Prime Insurance Company and Tower Hill Preferred Insurance Company, each downgraded from "A-minus" to "B." Omega Insurance Company was downgraded from "B-double-plus" to "B." Tower Hill Select Insurance Company remained nonrated "NR-2."

Tower Hill called the action a "direct reflection of the current Florida property insurance market."

A.M. Best analyst Jeff Mango said the company's cancellation of its 80-20 quota share reinsurance treaty has created concern about the amount of risk being retained in the volatile Florida market.

Eight hurricanes in the last two years, dramatic increases in reinsurance costs, changing weather patterns within the Atlantic basin, significantly increased home values and computer models that have been upgraded to reflect all of the above have resulted in the "perfect storm" from a Florida property insurance standpoint, according to Best.

"The combination of these factors has forced rating agencies such as A.M. Best to take a more conservative and critical view in their analyses of insurance companies with significant books of Florida property," the company said.

Despite significant hurricane losses in 2004 and 2005, the combined policyholders' surplus of the Tower Hill insurance companies has grown from $33.9 million on December 31, 2004 to $84.4 million on March 31, the company noted.

Additionally, Tower Hill was able to obtain over $1 billion of reinsurance for the 2006 hurricane season, the company said of its excess of loss coverage.

Special Reports /

Fla. Property Writer Downgraded

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