Issues are shifting quick in Florida’s distressed property insurance coverage market.
Simply days after St. Johns Insurance coverage Co. introduced it might cease writing new home-owner enterprise in Florida, the Demotech score company withdrew the provider’s monetary stability score on Thursday, because of the firm’s lack of adequate reserves and bleak monetary reviews.
A day later, the Tampa-based insurtech startup often known as Slide agreed to take over St. Johns’ owners guide of enterprise, Demotech and different sources have confirmed.
“We talked with Bruce Lucas and his firm and we’ll most likely assign a score within the close to future,” stated Demotech President Joe Petrelli.
Lucas is CEO of Slide, a startup that has gained appreciable consideration after the corporate introduced it had raised $100 million in capital final November. Lucas additionally is understood for his success with Heritage Insurance coverage, which grew quickly right into a super-regional insurer serving 15 states. Firm officers couldn’t be reached for remark Friday.
Additionally this week, Avatar Property & Casualty Insurance coverage, based mostly in Tampa, introduced that it, too, had stopped writing new enterprise within the state as of Thursday, making it the seventh firm in latest weeks to droop new writing or to non-renew hundreds of insurance policies in Florida.
“After cautious consideration, we’re taking precautions for the most effective pursuits of our policyholders, brokers, enterprise companions, and associates,” Avatar stated in a bulletin to brokers.
Demotech additionally withdrew its score for Avatar on Friday, after a name with firm executives.
Whereas a score withdrawal typically portends insolvency for carriers, Petrelli stated that Slide’s assumption of the home-owner guide may assist St. Johns survive. St. Johns is likely one of the bigger insurers in Florida, with greater than 160,000 policyholders. The transaction have to be reviewed by the Florida Workplace of Insurance coverage Regulation, however the workplace might expedite the matter in mild of the shrinking variety of carriers keen to do enterprise within the state.
Petrelli stated Avatar might also give you the chance discover some monetary help, however extra can be recognized in coming days.
The St. Johns non-rating, following years of wholesome monetary scores, was the results of the corporate revealing that it might not have as a lot surplus available because the score company requires, Petrelli stated.
“Primarily based on conversations with the corporate and seeing their plan of motion going ahead, we determined to withdraw the score,” Petrelli stated.
St. John’s third-quarter 2021 quarterly assertion exhibits the agency had $46 million in policyholder surplus. However since then, the monetary image has darkened, and the corporate stated it might not have that a lot within the financial institution by the tip of 2022.
“They’d a disastrous fourth quarter,” Petrelli stated.
It’s unclear at this level what impact the takeover by Slide, and the non-rating of Avatar, may have on policyholders. Executives with the Orlando-based St. Johns and with the Tampa-based Avatar couldn’t be reached for remark Friday. Petrelli stated the Avatar score withdrawal might not have an effect on present policyholders with mortgages, except Avatar is put into liquidation by state regulators.
In need of insolvency and liquidation, Florida’s Workplace of Insurance coverage Regulation can take different steps, together with company supervision, to handle distressed companie. The OIR didn’t reply to questions on what steps the workplace might tackle St. Johns and Avatar.
Petrelli famous that St. Johns nonetheless has some quantity of reserve funding.
“The query is, how does it handle its reserves,” he stated.
Demotech is certainly one of three main score companies. St. Johns and Avatar rankings by one other score company, AM Greatest, weren’t accessible Friday morning. Each insurers’ web sites continued to notice Friday that they’ve “A-exceptional” monetary rankings.
The score withdrawals are the starkest indication but that Florida’s property insurance coverage market is in meltdown, insurance coverage business leaders and state officers stated this week. The business has blamed hurricane losses, pointless and even fraudulent roof-replacement claims, and extreme litigation over claims.
Insurance coverage teams have urged Florida lawmakers to cross a brand new spherical of laws that would assist stem the crimson ink. Probably the most complete invoice, SB 1728, was accepted Wednesday by a key Senate subcommittee, and now goes to the complete Appropriations Committee.
The invoice, by Sen. Jim Boyd, R-Bradenton, would permit insurers to jot down extra insurance policies that cowl solely the precise money worth of roofs, not full substitute worth, aside from injury on account of a named hurricane. The invoice additionally would try to restrict solicitation by roofing contractors promising “free roofs” paid for by insurance coverage corporations, even when injury is from age and regular put on and tear.