78,000 FL Property Owners To Lose Insurance Coverage On July 15

FLORIDA — About 78,000 Florida property owners could be facing the most active months of the Atlantic Basin hurricane season with no insurance for their homes and businesses.

The Florida Department of Financial Services overseen by Florida Chief Financial Officer Jimmy Patronis filed a petition late Monday in the 2nd Judicial Circuit Court in Leon County declaring the Tallahassee-based Southern Fidelity Insurance Co. insolvent, or unable to pay the debts it owes.

Approved by the judge, the declaration allowed the insurance company to cancel all property insurance policies written in Florida, effective at 12:01 a.m. July 15.

The Florida Department of Financial Services is the court-appointed receiver for the company and will oversee the insurance company's liquidation.

With the prospect of having no insurance on their properties six weeks into the 2022 hurricane season, property owners and their insurance agents are scrambling to replace their insurance coverage. (See the details of Southern Fidelity's rehabilitation and liquidation on Patronis' website.)

After the liquidation order was filed, the Florida Insurance Guaranty Association was activated to help pay outstanding claims for Florida property and casualty policies and refund premiums paid to Southern Fidelity for coverage this year.

Since many of Southern Fidelity's customers have already paid their premiums for the year, Southern Fidelity was ordered to process and send its unearned premiums records to FIGA. FIGA said it expected to issue reimbursement to customers within 45 to 60 days from the liquidation date.

According to Insurance.com, the average premium for homeowners insurance policies in Florida is $3,643 for a policy with a $1,000 deductible on a home valued at $300,000.

FIGA receives a portion of its funds available to pay out premium reimbursements and unprocessed claims from the assets of the insolvent insurer.

The other source of funding is its membership, made up of insurance companies that still do business in Florida.

The funds are administered by a board elected by the guaranty association members and approved by Patronis, who also has an appointee on the association.

Southern Fidelity Latest Insurer Declaring Insolvency

Exacerbating an ongoing property insurance crisis in Florida that led to the Florida Legislature calling a special session at the end of May, Southern Fidelity was the fourth property insurance company operating in the state to be declared insolvent since February because it was unable to secure reinsurance for the upcoming hurricane season.

Reinsurance is the practice of finding one or more insurers to assume another insurance company's risk portfolio.

Other insurance companies included St. John's Insurance Co. Inc., which was liquidated Feb. 25; Lighthouse Property Insurance Corp., placed in receivership April 5; and Avatar Property and Casualty Insurance Co., which was liquidated March 14, according to Patronis.

Additionally, the Florida Office of Insurance Regulation approved Federated National Insurance's request to drop 68,000 of its property insurance policies, nearly half its Florida customers, and Lexington Insurance Co. will pull out of the state altogether as of Aug. 1.

In November, United Property and Casualty Insurance Co., one of the top 10 homeowners insurers in Florida with more than 180,000 policyholders, announced it would stop writing new policies in Florida as of Jan. 1. Additionally, the insurer requested a 14.7 percent rate increase.

Shortly after, two more carriers, Florida Farm Bureau and TypTap Insurance, reported to the state that they would no longer write new fire policies for homeowners in Florida. They were followed by United, People’s Trust, Universal, Heritage, Progressive, Safeport and Wilshire insurance companies, which have all stopped writing new policies in parts or all of the state.

Meanwhile, Progressive Insurance notified the Florida Office of Insurance Regulation that it would not renew policies for homes with shingle roofs that are 16 years old or older, affecting about 56,000 policyholders.

And People's Trust Insurance, based in Deerfield Beach, notified policyholders in February that it would no longer do business in eight south and central Florida counties, while Universal North American announced a 14.9 percent rate increase effective Feb. 22.

Last year, Gulfstream Property and Casualty Insurance Co. was liquidated on July 28 and American Capital Assurance Corp. on April 14.

The news of Southern Fidelity's insolvency comes two weeks after the deadline for property insurance companies to submit reinsurance plans to rating agencies and the state’s Office of Insurance Regulation.

Demotech, the state's insurance rating company, was completing all reviews of the state's property insurance companies last week. The Ohio-based actuarial firm announced March 26 that it had affirmed 37 of the 46 insurance companies writing policies in Florida that it rates. (To see which Florida insurers have received ratings from Demotech, click here.)

Florida Commissioner of the Office of Insurance Regulation David Altmaier said Southern Fidelity is still in active negotiations with other property insurers to take over the company's polices.

“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,” he wrote in a June 3 consent order.

Nonprofit Citizens Property Insurance Inundated

It's likely the state-backed Citizens Property Insurance Corp. will pick up some policies, although the insurer said it's been inundated because property owners are no longer able to find insurers in the private market.

Intended to be an "insurer of last resort," the nonprofit Citizens Property Insurance Corp. was formed by the Legislature after an unprecedented nine hurricanes and 11 tropical storms ravaged Florida between 1992 and 2018, resulting in more than $216 billion in property damage.

Unable to pay out the barrage of claims, insurance companies began pulling out of Florida, dropping policyholders and raising premiums.

Instead of being the "insurer of last resort," Citizens has become one of the top underwriters in Florida, writing about 6,000 new policies a week.

Citizens wrote 12,000 policies in a single week, with about half those customers seeking coverage from Citizens when Lighthouse went into receivership, dropping 893,000 polices as of June 13, said Michael Peltier, spokesman for Citizens Insurance Corp.

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 percent 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, making it the second-largest provider of property insurance in Florida.

"Citizens Property Insurance has seen an increase of 399,822 policies since the beginning of 2020 and is on track to have more than a million policies by the end of this year," Gov. Ron DeSantis said.

See related stories:

• Escalating Property Insurance Rates In FL Topic Of Special Session
• Insurance Rate Hikes Of 195 Percent Requested For Homeowners
• Homeowners Insurance Crisis Could Lead To FL Special Session
• FL Property Insurance Reform Focus Of Special Session OKed By DeSantis
• Property Insurance, Condo Inspection Legislation Signed By DeSantis

Insurance Reforms From Special Legislative Session

While the Legislature decided during May's special session to transfer $2 billion in general revenue to the Reinsurance Assistance Program for struggling insurance companies to access, the funds come with a series of caveats.

They can only be used for hurricane damage, not wind or tropical storm, and insurance companies requesting the funds must agree to reduce customer rates by June 30. Therefore, few insurers are applying for the funds.

Nevertheless, DeSantis touted the special session for enacting critical legislation to give homeowners relief.

"This package represents the most significant reforms to Florida's homeowners insurance market in a generation," DeSantis said. "These bills will help stabilize a problematic market, help Floridians harden their homes through the My Safe Florida Home Program, and pave the way for more choices for homeowners."

Senate Bill 2D, which goes into effect July 1, enacts measures to alleviate rising insurance costs, increase insurance claim transparency and crack down on frivolous lawsuits, which drive up costs for all Floridians.

What Happens Next?

Homeowners shouldn't expect to receive immediate refunds on the premiums they paid to Southern Fidelity this year.

The insurance company must first liquidate and transfer its records to the receiver (the Florida Department of Financial Services) for processing. This can take anywhere from six to 24 months, according to FIGA.

Afterward, the records will be sent to FIGA for appropriate action.

"FIGA, coordinating with the receivers of the liquidating companies, works hard to avoid delays, but it is not uncommon for delays of 30 to 60 days after the order of liquidation," said FIGA on its website.

Nor should property owners expect a full payment of their outstanding claims with Southern Fidelity from FIGA. The maximum amount FIGA will cover is generally $300,000 per claim. An additional $200,000 is available for structures and contents on homeowners’ claims. (For more information on FIGA’s claim handling see the FAQ section of the FIGA website.)

Until further notice, policyholders with questions regarding Southern Fidelity should continue to visit the company’s website at Southern Fidelity or contact the company directly at 866-874-7342 for customer service or 866-722-4995 for claims.