Florida property insurance company defaults after losses from Hurricane Ian

State regulators on Thursday began placing United Property & Casualty Insurance Co. under receivership after higher-than-expected losses from Hurricane Ian helped push the insurer into bankruptcy.

Interim Insurance Commissioner Michael Yaworksy sent a letter to Jimmy Patronis, the state’s chief financial officer, to begin a process that will lead to seeking court approval to place the St. Petersburg-based insurer under receivership, documents show published on the Office of Insurance Regulation website. United Property & Casualty approved the move.

United Property & Casualty has faced major financial problems for months, including announcing in August that it will exit Florida’s struggling homeowners insurance market. Tampa-based Slide Insurance Co. acquired 72,000 policies from United Property & Casualty on Feb. 1.

In a Feb. 10 filing with the Federal Securities and Exchange Commission, parent company United Insurance Holdings Corp. said United Property & Casualty is likely to be placed under receivership for bankruptcy.

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“United was declared bankrupt on February 6, 2023 because all of United’s assets, if immediately available, would not be sufficient to pay all of United’s liabilities. … (The Office of Insurance Regulation) has determined that United is operating in an unsound state that is dangerous for policyholders, creditors, shareholders and the public,” said Virginia Christy, director of the office’s Property & Casualty Financial Oversight Division, in a affidavit attached to Jaworski’s letter.

The move to place United Property & Casualty under receivership is another blow to Florida’s property insurance market. In 2022, the state placed six insurers in receivership because of insolvency.

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According to a document filed with the Securities and Exchange Commission on Feb. 6, United Property and Casualty had approximately 135,000 policies in Florida before Slide took over the 72,000 policies.

Thursday’s letter from the Office of Insurance Regulation and supporting documents do not provide detailed plans for United Property & Casualty’s remaining customers. The government-backed Citizens Property Insurance Corp. has made policies available to many homeowners who lost their insurance coverage due to last year’s bankruptcies.

Although Slide assumed the 72,000 policies, it is not liable for claims filed prior to February 1 by former United Property & Casualty customers. The bankruptcy and receivership will likely result in the Florida Insurance Guaranty Association having to step in to help pay United Property & Casualty claims.

The agency was created to handle claims from insolvent companies and can obtain estimates from policyholders across the country to help recover costs.

Christy’s affidavit Thursday detailed regulators’ years of concern about United Property & Casualty’s financial condition. The insurer has reported net underwriting losses of more than $35 million every year since 2017.

In July 2022, the company told regulators that its financial rating had been downgraded to a level below the requirements of mortgage industry giants Fannie Mae and Freddie Mac, who check whether homes owned by financially sound companies are insured. This resulted in regulators placing United Property & Casualty under a new program with Citizens Property Insurance serving as a backstop.

A Dec. 5 Office of Insurance Regulation order for so-called “public administrative oversight” said United Property & Casualty could not obtain reinsurance — critical backup coverage — for the 2023 hurricane season. It said the insurer plans to cancel all remaining policies on May 31 before the start of the season.

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But in the Feb. 10 filing with the Securities and Exchange Commission. United Property & Casualty’s parent company said the insurer was hit harder than expected by Hurricane Ian, which made landfall in southwest Florida on Sept. 28 as a Category 4 storm and transited the state.

United Property & Casualty had projected $660 million in gross damage from Hurricane Ian, but actual damage was $864 million. After accounting for reinsurance, the higher-than-expected net loss as of December 31 was $145 million, according to the Securities and Exchange Commission filing.

“As a result of UPC’s increased net losses…UPC is expected to default on December 31, 2022,” the Feb. 10 filing said. “Accordingly, the Company has notified the Florida Office of Insurance Regulation of the material impairment of UPC.”

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