Insurance coverage

78,000 FL owners will lose insurance coverage on July 15

FLORIDA — About 78,000 Florida homeowners could face the busiest months of the Atlantic Basin hurricane season without insurance for their homes and businesses.

The Florida Department of Financial Services supervised by Florida Chief Financial Officer Jimmy Patronis filed a motion Monday night in the Leon County 2nd Judicial Circuit Court declaring the Tallahassee base Southern Fidelity Insurance Co. insolvent or unable to pay the debts it owes.

Approved by the judge, this declaration allows the insurance company to cancel all property insurance policies written in Florida as of 12:01 a.m. on July 15.

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The Florida Department of Financial Services is the court-appointed receiver for the company and will oversee the liquidation of the insurance company.

With the prospect of having no insurance on their properties six weeks into the 2022 hurricane season, homeowners and their insurance agents are scrambling to replace their insurance coverage. (See details of Southern Fidelity’s rehabilitation and liquidation on Patronis’ website.)

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After the filing of the liquidation order, the Florida Insurance Guarantee Association (FIGA) has been activated to help pay outstanding claims for Florida property and casualty policies and refund premiums paid to Southern Fidelity for coverage this year.

Since many Southern Fidelity customers have already paid their premiums for the year, Southern Fidelity has been instructed to process and send its unearned premium records to FIGA. FIGA said it expects to reimburse customers within 45 to 60 days from the date of liquidation.

According to Insurance.comthe average premium for home insurance policies in Florida is $3,643 for a policy with a $1,000 deductible on a home worth $300,000.

FIGA receives a portion of its available funds to pay premium refunds and unprocessed claims from the assets of the insolvent insurer.

The other source of funding comes from its members, made up of insurance companies that still do business in Florida.

These funds are administered by a board elected by members of the guarantee association and approved by Patronis, which also had an appointee from within the association.

Southern Fidelity Last insurer to declare insolvency

Exacerbating an ongoing property insurance crisis in Florida that led the Florida Legislature to call a special session at the end of May, Southern Fidelity is the fourth property insurance company operating in the State to be declared insolvent since February because it could not obtain reinsurance for the next hurricane season.

“Reinsurance” is the practice of finding one or more insurers to assume the risk portfolio of another insurance company.

Other insurance companies include St. John’s Insurance Company Inc.which was liquidated on February 25; Lighthouse Property Insurance Corp., placed in receivership on April 5; and Avatar P&C Insurance Companywhich was liquidated on March 14, according to Florida Chief Financial Officer, Jimmy Patronis.

Additionally, the Florida Office of Insurance Regulation has approved Request from the National Insurance Federation to drop 68,000 of its property insurance policies, nearly half of its Florida customers, and Lexington Insurance Co. will completely withdraw from the state starting August 1.

In November, United Property and Casualty Insurance Co., one of Florida’s top 10 homeowners insurers with more than 180,000 policyholders, announced it will stop underwriting new policies in Florida effective Jan. 1. In addition, the insurer requested a rate increase of 14.7%.

Shortly thereafter, two other carriers, Florida Farm Bureau and TypTap Insurance, announced that they would no longer write new fire policies for homeowners in Florida. They were followed by insurance companies United, People’s Trust, Universal, Heritage, Progressive, Safeport and Wilshire, all of which stopped writing new policies in parts or all of the state.

Meanwhile, Progressive insurance informed the Florida Office of Insurance Regulation that it would not renew policies for homes with shingle roofs 16 years or older, which affects approximately 56,000 policyholders.

assurance of the confidence of the people, based in Deerfield Beach, informed policyholders in February that it would no longer do business in eight counties in southern and central Florida, while North American Universal announced a 14.9% rate increase effective Feb. 22.

Last year, Gulfstream Property and Casualty Insurance Co. was liquidated on July 28 and American Capital Assurance Corp. April 14.

News of Southern Fidelity’s insolvency comes two weeks after the deadline for property insurers to submit reinsurance plans to rating agencies and the state Insurance Regulatory Office.

Demotech, the state insurance rating company, was finalizing all reviews of state property insurance companies last week. The Ohio-based actuarial firm announced on March 26 that it had confirmed 37 of the 46 insurance companies that write policies in Florida that it rates. (To see which Florida insurers have received Demotech ratings, click here.)

Florida Office of Insurance Regulation Commissioner David Altmaier said Southern Fidelity is still in active negotiations with other property insurers to take over the company’s policies.

“Southern Fidelity has indicated that it is in active negotiations with other property insurers to transition some or all of Southern Fidelity’s policies to this insurer as part of a liquidation plan,” it said. he writes in a June 3 Consent Order.

Non-profit citizens property insurance flooded

It’s probably state support Citizens Property Insurance Corp. will take over some of the policies despite the insurer saying it has been inundated because owners are no longer able to find insurers in the private market.

Intended to be an “insurer of last resort,” the nonprofit Citizens Property Insurance Corp. was created by the Legislature after an unprecedented nine hurricanes and 11 tropical storms tore through Florida between 1992 and 2018, resulting in more than $216 billion in property damage.

Unable to pay the barrage of claims, insurance companies began pulling out of Florida, dropping policyholders and raising premiums.

Instead of being the “insurer of last resort,” Citizens became one of Florida’s top underwriters, writing about 6,000 new policies a week.

One week Citizens wrote 12,000 policies in a single week, with about half of those customers seeking coverage from Citizens when Lighthouse went into receivership, dropping 893,000 policies as of June 13, said Michael Peltier, gatekeeper. word of Citizens Insurance Corp.

Citizens chief operating officer Kelly Booten said at a meeting last week that Citizens wrote about 13,000 policies for former Avatar Property & Casualty Insurance Co. clients, or about 39% of fonts that Avatar had in the state.

As of May 31, Citizens had 883,333 policies, down from 463,247 policies two years earlier, making it Florida’s second-largest property insurance provider.

“Citizens Property Insurance has seen an increase of 399,822 policies since the start of 2020 and is on track to have over one million policies by the end of this year,” Governor Ron DeSantis said.

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Insurance reforms from special legislative session

While the Legislature decided in the May special session to transfer $2 billion in general revenue to the Reinsurance Assistance Program for struggling insurance companies, the funds come with a series of warnings.

They can only be used for damage caused by hurricanes, not wind or a tropical storm, and insurance companies requesting the funds must agree to lower customer rates by June 30. Consequently, few insurers ask for the funds.

Nonetheless, DeSantis touted the special session to enact critical legislation to relieve homeowners.

“This package represents the most significant reforms to the Florida home insurance market in a generation,” DeSantis said. “These bills will help stabilize a problematic market, help Floridians harden their homes across the My Safe Florida Home Programand pave the way for more choice for homeowners.”

2D Senate Billwhich takes effect July 1, enacts measures to mitigate rising insurance costs, increases transparency in insurance claims and cracks down on frivolous lawsuits, which drive up costs for all Floridians.

What happens next?

Owners should not expect to receive immediate refunds on the premiums they paid to Southern Fidelity this year.

The insurance company must first liquidate and transfer its cases to the receiver (the Florida Department of Financial Services) for processing. This can take anywhere from six to 24 months, according to FIGA.

Then the recordings will be sent to FIGA for appropriate action.

“FIGA, in coordination with the trustees of the companies in liquidation, is working hard to avoid delays, but it is not uncommon for delays of 30 to 60 days after the liquidation order,” said FIGA on its website.

However, owners should not expect full payment of their outstanding receivables from FIGA’s Southern Fidelity. The maximum amount FIGA will cover is generally $300,000 per claim. An additional $200,000 is available for structures and content on owners’ claims. (For more information on the handling of FIGA complaints, see the FAQs section of the FIGA website.)

Until further notice, policyholders with questions regarding Southern Fidelity should continue to visit the company’s website at Southern Loyalty or contact the company directly at 866-874-7342 for customer service or 866-722-4995 for complaints.

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