Frederick Mutual, which is exiting the personal lines market and focusing strictly on commercial lines in the Mid-Atlantic and Southern regions, has reached a renewal rights agreement with another insurer for the bulk of its personal lines business.
Beginning January 1, 2024, Farmers Mutual Fire Insurance Company of Salem County has agreed to quote and issue replacement coverage to all of Frederick Mutual’s personal lines policyholders in Maryland and Pennsylvania who apply to Farmers of Salem and qualify for coverage in accordance with its underwriting guidelines.
Nancy Newmister, president of Frederick Mutual, told Insurance Journal that similar renewal agreements with two insurers for personal lines policyholders in Virginia and North Carolina are being finalized.
Newmister declined to say how many policies are being affected at this time. She stressed that the insurer has been working for months on transitioning employees, agents and policyholders. Farmers of Salem is taking on affected employees and agencies as well as qualified policyholders.
Regulators in Maryland and Pennsylvania have approved the market withdrawals, Newmister said. The renewal agreements are not required or subject to regulatory approval; they are the company’s own initiative.
The company is licensed to transact business in Maryland, Pennsylvania, Virginia, North Carolina, Delaware, South Carolina, and the District of Columbia. The majority of its business is from Maryland and Pennsylvania. Frederick Mutual’s products are offered through independent agencies.
Frederick Mutual’s personal lines results deteriorated significantly in 2020 and 2021, according to a Maryland Insurance Administration (MIA) examination of the insurer filed in April. The MIA examination of the insurer, which covered the five-year period 2017-2021, cited concerns over a decline in surplus, continued underwriting losses, and high expense ratios.
However, MIA examiners found that the company took steps to improve its results and reverse the negative surplus trend. These measures included the introduction of new products, rate increases, and termination of its relationships with poorer-performing agents.
The company also implemented a reorganization plan from a mutual insurer into a stock insurance company subsidiary of a mutual insurance holding company.
Newmister said 2022 was a “horrible” year. The MIA noted that the third quarter 2022 had a net underwriting loss of $1.9 million.
Newmister said her company tried but was unable to reverse negative trends in personal lines and decided it needed to “pivot” to commercial lines only. Over the past few years, the company has invested in and grown its commercial business to now be as much as 90% of its writings, up from its prior 60% commercial and 30% homeowners in 2021. Commercial lines is where it intends to focus, Newmister said.
The companies said Farmers of Salem will be conducting a review of Frederick Mutual’s personal lines policies and will be making an offer of coverage if a policy qualifies. Farmers of Salem distributes through independent agents in New Jersey, Maryland, Pennsylvania, and Delaware.
In August, AM Best affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Farmers of Salem. The rating firm revised the outlooks to negative from stable.
Farmers of Salem was founded in New Jersey in 1851. It moved its headquarters to Wilmington, Delaware in 2021.
Topics Agribusiness Pennsylvania Maryland Delaware
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