All policies of Florida property insurer Coral Insurance will be cancelled as of May 31, 2009 and any unearned premiums will be returned to policyholders, under a state plan approved by a Leon County judge overseeing the receivership of the financially-strapped insurer.
Officials from the office of Chief Financial Officer Alex Sink who are running the company while it is in receivership have determined that Coral can’t afford to purchase catastrophe reinsurance to mitigate its potential exposure in the 2009 hurricane season. This, they say, is a situation that “presents unacceptable risks to policyholders, claimants, other creditors and the public.”
As a result, the CFO as receiver requested and obtained an order from the Second Judicial Circuit Court in Leon County, directing the cancellation of Coral’s in-force policies prior to the start of the hurricane season. Thus all policies not otherwise cancelled or terminated prior to 12:01 a.m. on May 31, 2009, will be considered cancelled as of that time and date.
The receiver said it is making arrangements to return the unearned portion of policyholders’ premium already in advance of the May 31, date.
Coral will continue to process cancellation requests received with cancellation dates prior to May 31, 2009 in the normal course of business. However, once the mass cancellation process has begun, cancelling policies effective as of 12:01 a.m. on May 31, 2009, any additional premium due to policyholders who cancel prior to that date will be processed on a supplemental basis.
The CFO’s office said that based upon current projections, it appears that Coral will have sufficient funds to meet its obligations, including the payment of unearned premium and claims. However, they added, liquidation of the company is still a possibility.
To help assure that Coral has adequate funds to administer the receivership and avoid any disparate treatment of policyholders and claimants in the event that Coral is liquidated, Coral will retain the first $100 of the initial return premium/claim payment. If the receiver ultimately determines that sufficient funds are available, it will process and pay the $100 retentions at a later date, according to the approved plan.
Leon County Circuit Court Judge P. Kevin Davey ordered the Hollywood-based Coral Insurance Co., a residential property insurance provider in Florida, into receivership for the purpose of rehabilitation. The Department of Financial Services was named as the receiver as of April 9.
Coral Insurance, which has approximately 11,750 homeowner policyholders, has an agreement with Security First Insurance Co. and the MacNeill Group, Inc. to provide replacement coverage to policyholders.
Homeowners with homes valued at under $1 million have the option to get coverage with insurer Security First, while homeowners with homes valued at $1 million or more can buy coverage with the MacNeill Group, Inc., a managing general agency, if they want.
Coral Insurance policyholders are being urged to contact their agents to discuss their coverage options.
Agents who do not currently have an agency appointment with Security First can obtain one by contacting the insurer, according to officials.
Coral Insurance Co. stopped writing new coverage in early March and stopped writing renewal coverage after March 29, 2009.
On March 27, the state suspended the company’s license to write business for six months after determining that the insurer had about $2 million less than the $4 million in surplus it should have.
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