TALLAHASSEE, Florida. – United Property & Casualty Insurance Co. will exit Florida’s struggling home insurance market, forcing customers to find new coverage as their policies are renewed, the insurer’s parent company announced Thursday.
Petersburg-based United Insurance Holdings Corp. said it had filed plans to pull out of so-called personal lines markets in Florida, Texas and Louisiana. He will also file an exit plan in New York.
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A press release from the parent company said the plans would “effectively put United P&C into an orderly run-off,” meaning the policies will be phased out as they are renewed. The announcement highlighted, in part, issues with obtaining reinsurance, which is essential relief coverage to help manage things such as hurricane claims.
“Due to significant uncertainty about the future availability of reinsurance for our personal lines business, I believe it is prudent and necessary to place United P&C in an orderly run-off to protect the business and its policyholders,” said Dan Peed, president and CEO of United Insurance Holdings. in a prepared statement. “The company actively seeks opportunities to leverage its people, technology and other capabilities. Our business activity continues to perform well and provides the company with a stable platform to build new engines of growth and profitability.
The parent company said in July that it had begun a “review of its strategic and capital-raising alternatives” amid financial losses. Financial rating agency Demotech subsequently downgraded United Property & Casualty from an “A Exceptional” rating to an “M Moderate” rating.
The press release issued on Thursday says Demotech has notified United Property & Casualty that it will withdraw the insurer’s rating. Rating withdrawals were precursors to the declaration of insolvency and the receivership of certain insurers.
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Thursday’s announcement did not specify how many customers in Florida and other states would be affected. But a United Insurance Holdings investor presentation in May cited about 185,000 Florida policies as of March 31.
United Property & Casualty is the latest insurer to exit the Florida market or dramatically reduce loss coverage. As an indication of the turmoil, five property insurers have been ruled insolvent since February, and the state-backed Citizens Property Insurance Corp. has ballooned to more than a million policies as many homeowners have little other coverage alternatives.
At a state Cabinet meeting on Tuesday, Insurance Commissioner David Altmaier acknowledged that Florida faces a “very difficult market.” But he said the state had taken “a significant number of positive steps to address this crisis” with legislation passed in recent years and at a special session in May.
“As we have said many times before, there is no overnight solution to this insurance crisis. It has been brewing for years, unfortunately,” Altmaier told members. Cabinet and Governor Ron DeSantis, “But the steps we’ve taken so far under your leadership are going to be significant steps forward in addressing this issue.”
In addition to difficulties obtaining reinsurance, property insurers have blamed a large number of lawsuits in Florida on financial problems. Florida, Louisiana and Texas are also likely to be battered by costly hurricanes.
“Extreme weather, coupled with rampant litigation, is the reason for this announcement,” insurance lobbyist and former regulator Lisa Miller said Thursday of the United Property & Casualty decision.
After Demotech’s initial downgrade from United Property & Casualty, the state Insurance Regulatory Board on Aug. 2 put the company in a new interim program aimed at ensuring coverage would continue for homeowners.
The program involves Citizens Property Insurance acting as financial support for private insurers who are downgraded. Citizens have taken on a reinsurance role to ensure claims are paid if insurers become insolvent.
Financial ratings are important, in part because mortgage giants Fannie Mae and Freddie Mac require homes to be insured by financially sound companies. For insurers rated by Demotech, Fannie Mae and Freddie Mac require “A” ratings or better.
Demotech’s downgrade of United Property & Casualty put the insurer below an A rating. The state’s interim program is designed to satisfy Fannie Mae and Freddie Mac in such situations. It uses an exception in the Fannie Mae and Freddie Mac standards that applies when reinsurers take responsibility for paying claims if the insurers fail.