KBRA assigns a BBB Insurance Financial Strength Rating (IFSR) to Trident Reciprocal Exchange. The Outlook for the rating is Stable.

Key Credit Considerations

Trident Reciprocal Exchange (“Trident” or “the Reciprocal”) is a de novo reciprocal exchange recently established to write homeowners’ insurance in Florida.

The rating reflects Trident’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 improved pricing and lower litigation exposure following legislative reforms in recent years. Additionally, as a start-up insurer, Trident has no legacy liabilities. Trident will have manageable start-up expenses due to an organizational structure whereby the Attorney-in-Fact (AIF) 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 Trident's high financial leverage due to its entire surplus base consisting of a $27 million surplus note. Furthermore, as a Florida homeowners’ writer, the Reciprocal will have product and geographic concentration, natural catastrophe exposure due to hurricanes, and a high reliance on reinsurance that, depending on availability and affordability, could materially impact results. Lastly, as a de novo insurer, Trident’s future profitability is uncertain and dependent upon management executing its business plan.

Rating Sensitivities

Execution of the business plan above forecasts provided to KBRA, including organic surplus growth that reduces financial leverage faster than expected, improved financial flexibility and a favorable change in risk profile could result in positive rating action.

Results materially below forecasts provided to KBRA, significant weather events that materially impact earnings and capital, an inability to obtain reinsurance on acceptable terms and pricing and an unfavorable change in risk profile could result in negative rating action.

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Methodologies

• Insurance: Insurer & Insurance Holding Company Global Rating Methodology
• ESG Global Rating Methodology

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.

Information on the meaning of each rating category can be located here.

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.

Doc ID: 1005679

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