Florida property insurance company declares itself insolvent due to losses caused by Hurricane Ian

State regulators moved forward on Thursday by placing United Property & Casualty Insurance Co. into bankruptcy proceedings after higher-than-expected losses from Hurricane Yang helped an insurance company become insolvent.

Interim Insurance Commissioner Michael Jaworsi sent a letter to the state’s chief financial officer, Jimmy Patronis, to initiate a process that would result in a court order granting the St. Petersburg insurance company a bankruptcy proceeding, according to documents posted on the Insurance Regulatory Authority’s website. United Property & Casualty agreed to the move.

United Property & Casualty has been in serious financial trouble for months, including announcing in August that it was pulling out of Florida’s troubled homeowners insurance market. On February 1, Slide Insurance Co. of Tampa purchased 72,000 United Property & Casualty policies.

In a Feb. 10 filing with the Federal Securities and Exchange Commission, parent company United Insurance Holdings Corp. stated that United Property & Casualty is expected to be taken over due to insolvency.

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“United was declared insolvent on 6 February 2023 because if all of United’s assets, if provided immediately, would not be sufficient to meet all of United’s obligations. … (Insurance Regulatory Authority) has determined that United is operating in an unhealthy condition that is dangerous to policyholders, creditors, shareholders and the public,” Virginia Christie, director of property and casualty financial supervision, said in a sworn statement. attached to Yavorsky’s letter.

United Property & Casualty’s transition to receivership was another blow to Florida’s property insurance market. In 2022, the state declared bankruptcy of six insurance companies.

United Property and Casualty had about 135,000 policies in Florida before Slide took over 72,000 policies, according to a filing Feb. 6 with the Securities and Exchange Commission.

Thursday’s letter from the Insurance Authority and accompanying documents did not provide details on plans for United Property & Casualty’s remaining clients. The state-backed Citizens Property Insurance Corp. provided policies to many homeowners who lost insurance coverage due to insolvency last year.

While Slide has assumed 72,000 policies, it is not responsible for claims filed prior to February 1st by former United Property & Casualty clients. The insolvency and receivership will likely result in the Florida Insurance Guarantee Association having to intervene to help pay United Property & Casualty’s claims.

The agency was set up to handle claims from insolvent companies and can collect assessments from policyholders across the state to cover costs.

Christie’s sworn letter, released Thursday, detailed years of regulators’ concerns about the financial health of United Property & Casualty. It says the insurer has incurred net underwriting losses of more than $35 million a year since 2017, it says.

In July 2022, the company notified regulators that its financial rating had been downgraded to below that required by mortgage industry giants Fannie Mae and Freddie Mac, which monitor whether homes are insured by financially sound companies. This led the regulators to include United Property & Casualty in a new program with citizen’s property insurance as a support.

A Dec. 5 order from the Insurance Regulatory Authority on so-called “state administrative oversight” said United Property & Casualty was unable to obtain reinsurance — critical back-up coverage — for the 2023 hurricane season. It says the insurance company planned to cancel all remaining policies on May 31, before the start of the season.

But in the filing of the Securities and Exchange Commission dated February 10. Parent company United Property & Casualty said the insurance company was hit harder than expected by Hurricane Ian, which struck southwest Florida as a Category 4 storm on September 28 and crossed the state.

United Property & Casualty expected $660 million in gross losses from Hurricane Ian, but actual losses were $864 million. Including reinsurance, the larger-than-expected net loss as of December 31 was $145 million, the Securities and Exchange Commission said in a statement.

“As a result of the increase in net losses incurred by UPC… UPC is expected to become insolvent as of December 31, 2022,” the February 10 statement said. “Accordingly, the company notified the Florida Insurance Authority of a material impairment of UPC.”

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