“Could be an unmitigated disaster”
The Florida Legislature’s May 23-25 special session didn’t come soon enough for yet another insurance company which is now trying to wind-down at least some of its operations among growing concern by ratings agencies of more companies that could follow suit by the end of this month. Southern Fidelity Insurance failed to secure enough reinsurance for the hurricane season and lost its Demotech Financial Stability Rating (FSR) on June 2 as a result. A subsequent consent order with the Florida Office of Insurance Regulation (OIR) required the company to submit a remediation plan this past Wednesday, which is now under review by regulators. The company has been in active negotiation with other carriers to take some or all of its 78,000 homeowners policies in Florida. It has another 69,000 policies in force out of state. The company had previously announced it wasn’t writing any new or renewal policies.
Other companies making recent moves to adjust to reinsurance and/or market uncertainties:
- Tower Hill Group, which on May 31 stopped writing business into Tower Hill Preferred Insurance Company and Tower Hill Signature Insurance Company and took a voluntary withdrawal of their FSR A-rating from Demotech. The Group will move forward with its Tower Hill Insurance Exchange and Tower Hill Prime Insurance Company which retain their FSR ratings.
- People’s Trust, which on May 19 suspended writing new homeowners and dwelling fire policies until it can file new rates reflecting its newly completed reinsurance buy for the season.
- ASI/Progressive, effective June 1 has suspended new homeowners and dwelling fire business in the six counties of Brevard, Broward, Collier, Lee, Miami-Dade, and Palm Beach.
- Allstate, effective June 1 has suspended new condo unit owner and co-ops business for its independent agency channel.
The moves come despite the legislature enacting various reforms during the special session, including the $2 billion state-funded Reinsurance to Assist Policyholders (RAP) Program. Simply put, it wasn’t enough to convince the reinsurance industry to back risks during the hurricane season that began June 1. Reinsurance deals are simply hard to make now and Demotech’s Joe Petrelli in a published report said it “could be an unmitigated disaster” if many more companies fail to complete their reinsurance buys, as they will lose their rating and be forced by regulators to run-off policies or face insolvency.
That makes 11 companies that have now stopped writing new business in Florida since January. Another six companies have become insolvent since 2019 with five of them just in the past 11 months.
Because of this, state-backed Citizens Property Insurance Corporation went from averaging 6,000 new policies per week to recently 12,000 in one week. The insurer of last resort has a policy count now of about 888,000 as of June 3 compared to 610,000 a year ago. It is easily expected to surpass 1 million policies by year’s end. A big policy count is not good, given a big hurricane or a series of smaller ones could result in Citizens and non-Citizens policyholders across most property insurance lines paying assessments to help pay storm claims. Reforms in the recent special session did not include Citizens, such as limiting its policyholders in vetoing take-outs of their policies to the private market.
Newsletter of 6-13-22
