The information {that a} startup Florida insurance coverage firm will assume $400 million in insurance policies from the now-insolvent St. Johns Insurance coverage Co. – with out enter from different carriers – has set tongues wagging and emails flying amongst Florida insurance coverage executives.
Within the charged ambiance of Florida’s distressed property insurance coverage market, the place 5 carriers have been liquidated within the final 30 months, insurers say each benefit is required. And a few executives wish to know why state regulators didn’t provide them the possibility to tackle a number of the 147,000 insurance policies — and greater than $90 million in money from unearned premiums — that newcomer Slide Insurance coverage will obtain underneath the phrases of a current court docket order and transition plan.
“It’s a very good consequence for St. Johns brokers and customers, that’s true. Nevertheless it’s additionally true that nobody else had the chance to bid on not less than a portion of their e-book of enterprise,” stated Locke Burt, chairman and CEO of Safety First Insurance coverage, primarily based in Ormond Seashore.
A lot of executives advised the Insurance coverage Journal in early March that the transfer by the Florida Workplace of Insurance coverage Regulation was so fast and with out session with the general public or with different firms that it doesn’t move the odor check. Florida carriers are asking how Slide CEO Bruce Lucas appeared to know that St. Johns was going underneath earlier than anybody else knew.
With the unearned premium cash flowing to Slide — and most Florida carriers caught with a 1.3% evaluation to assist the state warranty affiliation cowl St. Johns’ current claims — it nearly looks like long-time Florida insurers are subsidizing a startup competitor, or robbing Peter to pay Paul, one insurance coverage govt stated.
“It’s an unfair benefit for Slide,” stated Bob Ritchie, CEO of Tampa-based American Integrity Insurance coverage.
Insurers are also fearful that the evaluation by the Florida Insurance coverage Warranty Affiliation, due in April, could possibly be the primary of a number of: Extra insurers in Florida’s distressed property market are anticipated to turn into bancrupt this yr, and even a small evaluation on a service’s premium can imply tens of millions of {dollars} should be paid unexpectedly and handed on to policyholders, a lot of whom already are dealing with greater premiums.
“Are we going to have to try this each time now, perhaps six extra occasions within the subsequent yr or so?” one insurance coverage vice chairman stated. “This trade doesn’t have, sitting round in money, 1.3% of all of the direct written premium. There’s a money circulate downside within the trade now.”
For a smaller service, with $250 million in premium, for instance, the St. Johns evaluation quantities to $4 million that should be paid by April 1. For all Florida insurers affected, the evaluation would come to a complete of about $190 million, insurers stated.
Florida Insurance coverage Commissioner David Altmaier’s workplace didn’t instantly reply to requests for an interview in regards to the Slide transaction. However Lucas advised the Insurance coverage Journal that Slide must pay the evaluation, similar to different members of FIGA.
He additionally stated there was nothing inappropriate in regards to the transition of St. Johns insurance policies to Slide, and that he had not spoken with Altmaier about it.
“We have been simply minding our enterprise and rolling out our firm and it simply type of fell into our lap,” Lucas stated. “These guys had a disaster and we have been in a position to step in shortly to unravel it.”
Lucas declined to say which regulators he or different Slide officers had spoken with or when, or who approached whom about St. Johns. However he stated that Slide had been in talks with St. Johns officers not too long ago.
“We have been in discussions with St. Johns. They have been considering having a dialog, but it surely’s not like there was some massive advance warning,” he stated. “It’s not like we have been engaged on this for six months. We had a really quick time window to decide. We made the choice primarily based on the circumstances.”
The timeline of the ultimate days of the 19-year-old, Orlando-based St. Johns provides an concept of how shortly the panorama modified. In early February, St. Johns, listed at one time because the eighth-largest P/C service in Florida, introduced that it could cease writing new enterprise within the state on Feb. 15.
On Feb. 17, the Demotech ranking company withdrew St. John’s monetary stability ranking altogether attributable to a scarcity of sufficient reserves. A day later, Slide, a Tampa-based insurtech nonetheless elevating capital, agreed to take over St. Johns’ householders e-book of enterprise. Slide didn’t obtain its certificates of authority as a service till Feb. 24, OIR’s web site reveals.
At some point later, on Feb. 25, the Florida Division of Monetary Companies’ Division of Rehabilitation and Liquidation requested the circuit court docket in Tallahassee to approve the transition of insurance policies to Slide. That very same day, the Workplace of Insurance coverage Regulation finalized a consent order, formalizing the deal and a change in marketing strategy for the startup, in accordance with the paperwork.
“The transition plan protects St. Johns’ policyholders by offering transition protection,” the consent order reads.
The doc additionally notes that OIR had reviewed Slide’s change in marketing strategy, its deliberate disaster reinsurance program and its skill to offer protection to St. Johns’ insureds. Slide has been funded with $25 million in surplus and has indicated it’s going to have $39 million in surplus by the top of March, the doc defined.
Three days later, on Feb. 28, the circuit court docket authorised the transition plan. That very same day, the FIGA board of administrators authorised the 1.3% evaluation, the second for 2022 to cowl bancrupt firms’ excellent claims. St. Johns wrote insurance policies in South Carolina, in order that state’s warranty affiliation additionally was concerned in approving the liquidation.
“When you consider everybody that needed to be lined up, from Slide, to OIR, DFS, FIGA, and the South Carolina warranty affiliation, does it appear cheap that all of it occurred in 48 hours or so?” Burt requested.
Lucas stated the transition adopted customary process and that different takeovers of bancrupt firms’ insurance policies have moved simply as shortly. Lucas was beforehand head of Heritage Insurance coverage, which took simply 4 days to imagine 1000’s of home-owner insurance policies when Sawgrass Mutual Insurance coverage Co. was put into liquidation in 2017, he stated.
“When an organization is aware of they’re impaired, plenty of occasions it’s associated to reserves and it occurs fairly shortly,” Lucas stated. “We had the bandwidth to do a transaction.”
A extra standard strategy would have been to let the state-run Residents Property Insurance coverage tackle the St. John’s insurance policies, then let Slide make a take-out provide, as carriers have performed in earlier insolvencies.
Lucas stated that each one of his rivals’ issues in regards to the St. Johns deal are unfounded.
“I feel perhaps some individuals are simply attempting to stir the pot,” Lucas stated.
