Leon County (Florida) Circuit Court Judge Thomas Bateman has ordered Southern Family Insurance Company, one of three financially-troubled property insurers of the Tampa-based Poe Financial Group, into rehabilitation.
The two other Poe companies appear to be on the brink of being taken over as well.
To ensure that Southern Family policyholders are protected this hurricane season, Tom Gallagher, Florida’s CFO, plans to petition the court to allow policyholders unable to secure coverage in the private market to automatically transition to the state’s insurer of last resort, Citizens Property Insurance Corporation, by July 1.
Bateman appointed the Department of Financial Services as receiver for Southern Family Insurance Company. As receiver for a company in rehabilitation, the department takes over the insurer’s operations and marshals the company’s resources to pay outstanding claims.
“With the hurricane season starting June 1, we are relieved the judge has taken the first step in our plan to transition policyholders to the state’s insurer of last resort without any change in their coverage or premiums,” said Gallagher, who oversees the department. “Our priority now is to get any outstanding hurricane claims paid as quickly as possible.”
The second Poe insurer, Atlantic Preferred Insurance Company, is expected to be ordered into rehabilitation on May 1 due to failure to meet the capital and surplus requirements under Florida law.
In an official notice to Gallagher, Insurance Commissioner Kevin McCarty with the Office of Insurance Regulation, recommended that both Southern Family and Atlantic Preferred be put into liquidation on or about June 1. If both companies consent, they will enter into liquidation without a hearing.
Southern Family primarily wrote commercial residential and personal residential coverage, and covered approximately 43,000 policyholders.
Atlantic Preferred provides coverage to nearly 140,000 homeowners, mostly in south Florida. Both companies were ordered by Insurance Commissioner Kevin McCarty to stop writing new and renewal business earlier this year.
The third insurer, Florida Preferred Insurance Company, is also expected to be ordered into rehabilitation on June 1. According to the Office of Insurance Regulation, if the company is unable to obtain reinsurance, it should be placed into liquidation. Approximately 100,000 homeowners are covered by the company.
When a company is in liquidation, the department continues to serve as receiver but the Florida Insurance Guaranty Association is activated to help pay outstanding claims. FIGA is funded by insurers with written premiums in the same lines of coverage. Liquidated assets of the companies will also be used to reimburse FIGA for outstanding claims that are paid.
Gallagher is urging policyholders to work with their insurance agents to obtain property coverage from private insurers rather than with Citizens, the state’s insurer of last resort.
Under the proposed plan from the Office of Insurance Regulation, if policyholders find that Citizens is the only option available, then they will not need to fill out an application or contact Citizens. If any of the companies are ordered into liquidation by the court, coverage would cease on or about June 30 but policyholders would be automatically provided coverage through Citizens on the same day without any disruption in insurance coverage.
Gallagher said that Citizens will provide the same level of coverage with no increase in premiums. However, Citizens’ rates will be applied when a policyholder’s anniversary date arrives, which is when the policy issued by one of the Poe companies was scheduled for renewal.
The Office of Insurance Regulation has suggested the following timeline for rehabilitation and liquidation for the three companies:
April 25: Southern Family placed into rehabilitation. Policyholders are encouraged to seek alternate coverage.
May 1: Atlantic Preferred placed into rehabilitation. Policyholders are encouraged to seek alternate coverage.
June 1: If unable to obtain reinsurance, Florida Preferred will be placed into liquidation. Policyholders are encouraged to seek alternate coverage.
June 1: Southern Family and Atlantic Preferred placed into liquidation. Policyholders are encouraged to seek alternate coverage.
On or about June 30: Remaining policyholders with Southern Family, Atlantic Preferred and potentially Florida Preferred will be automatically covered by Citizens Property Insurance Corporation without any disruption in coverage, level of coverage or premium increase.
Gallagher said his goal is to get outstanding claims paid as quickly as possible and assist policyholders with existing damage in obtaining needed repairs so they can properly insure their homes when the next offer of coverage is made.
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