New assessments on all policyholders
A second Florida property insurance company in a week has admitted it’s insolvent and is now in the process of being taken over by the state, having its assets liquidated, and its policyholders left to find new coverage. Avatar Property & Casualty Insurance Company of Tampa at last report had almost 42,000 policies in force. The Department of Financial Services (DFS) on Friday petitioned the Leon County Circuit Court for receivership of Avatar after getting a letter from Insurance Commissioner David Altmaier declaring the company insolvent earlier in the week. The previous week, DFS filed a similar petition for St. Johns Insurance Company, which has 160,000 policyholders in Florida. Both St. Johns and Avatar announced in mid-February they would no longer write new policies. Demotech pulled its Financial Stability Rating for both.
Avatar’s demise is the fourth such insolvency in the state since mid-2021 and the sixth since 2019. FC&S Insurance calls it “another indicator of the meltdown of the Florida property insurance market that has been besieged by hurricane losses, fraudulent roofing claims, and excessive litigation primarily involving assignment of benefit claims.” To date, seven companies have stopped writing new policies and/or renewals in Florida.
When these insolvencies occur, it’s the job of the Florida Insurance Guaranty Association (FIGA) to pay covered claims for policyholders. But it comes at a price to all property insurance policyholders in the state, excepting automobile policies. FIGA last week approved a $312 million assessment (1.3%) on the remaining carriers in the state to pay for St. Johns’ claims. It follows a $168 million assessment (0.7%) in October 2021 to cover the outstanding claims of two previous insolvencies. While the carriers can eventually pass along the assessment surcharge to their own policyholders, they will be required to pay this in advance by April 15, which could potentially sink more insurers, requiring further assessments.
FIGA asked the Florida Office of Insurance Regulation to approve the assessment by March 15. But late news comes that the FIGA Board of Directors will hold another meeting on this matter tomorrow (March 8 at 3pm) which may change the Board’s decision about the assessment, the way it will be paid, or other parameters of this issue. (For those who would like to attend, dial 850-739-5608, access code 6678862#.) We’ll report back in next Monday’s newsletter.
Two news articles of note to pass along. As property insurance market crashes, where is the sense of urgency? reminds us that Citizens Property Insurance expects to surpass the 1 million policies mark by year end, as the “insurer of last resort” the legislature created in 2002 has now become Florida’s largest property insurance company and the “insurer of first resort.” Another one bites the dust – Florida’s insurance failures continue reports that almost half of Florida’s domestic insurance companies haven’t been able to succeed over the past 20 years. It also warns that “Demotech is said to be considering further rating moves, while the more thinly capitalized Florida property insurers could have a torrid reinsurance renewal ahead of them, with higher rates and much more onerous terms.”
(Editor’s Note: An earlier version of this story mistakenly stated that the FIGA assessment for St. Johns Insurance Company was $190 million.)
LMA Newsletter of 3-7-22
