Another Florida homeowners insurance company
Article Courtesy of The News Service of Florida
By Jim Saunders
June 20, 2022
TALLAHASSEE — Saddled with financial losses and
lacking reinsurance for this year’s hurricane season, another Florida
property-insurance company is headed toward receivership.
The Florida Department of Financial Services late Monday filed a
petition in Leon County circuit court to be appointed as a receiver for
Southern Fidelity Insurance Co. The petition described Southern
Fidelity, which has about 78,000 policies in Florida, as “insolvent.”
The move was the latest blow to the state’s troubled property-insurance
market. Tallahassee-based Southern Fidelity became the fourth insurer
declared insolvent since late February, following Lighthouse Property
Insurance Corp., Avatar Property & Casualty Insurance Co. and St. Johns
The petition, posted on the court website Wednesday, did not detail
plans for replacement coverage for Southern Fidelity’s customers. But a
June 3 document signed by state Insurance Commissioner David Altmaier
said Southern Fidelity was trying to shift policies to other companies.
“Southern Fidelity has represented that it is in active negotiations
with other property insurers to effectuate the transition of some or all
of Southern Fidelity’s policies to that insurer as part of a wind-down
plan,” Altmaier wrote in what is known as a consent order.
At least some policies likely will go to the state-backed Citizens
Property Insurance Corp. which has seen its number of customers explode
during the past two years as private insurers have shed policies and
sought hefty rate increases.
As an example, Citizens Chief Operating Officer Kelly Booten said during
a meeting last week that Citizens wrote about 13,000 policies for former
customers of Avatar Property & Casualty Insurance Co., or about 39% of
the policies Avatar had in the state.
As of May 31, Citizens had 883,333 policies, up from 463,247 policies
two years earlier.
The Southern Fidelity petition came less than a month after state
lawmakers held a special legislative session to try to shore up the
property-insurance system. But the Southern Fidelity insolvency was not
a surprise: The rating agency Demotech announced early this month that
it had withdrawn the company’s financial-stability rating.
A final straw for insurance regulators was Southern Fidelity’s inability
to purchase reinsurance by the June 1 start of the hurricane season.
Reinsurance is critical backup coverage for insurers, but it has become
more expensive and harder to find.
“Respondent’s lack of catastrophe reinsurance renders the continuation
of its insurance business prospectively hazardous to its policyholders,”
the petition said.
The petition said Southern Fidelity, which also has about 69,000
policies in Louisiana, South Carolina and Mississippi, agreed last week
to the appointment of the Department of Financial Services as a
Altmaier notified state Chief Financial Officer Jimmy Patronis in a
letter Friday, leading to the petition being filed Monday.