One of Florida’s young property insurance companies, Magnolia Insurance Co., has been stripped of its financial rating by rating firm Demotech, Inc.
Demotech assigned its Financial Stability Rating of A, Exceptional to Magnolia in October, based on what it said was extended discussion with the insurer’s management and the promise that a business plan with key changes would be implemented. The business plan called for reimplementation of processing systems, the addition of experienced insurance personnel, a significant capital contribution and a revision in the insurer’s reinsurance program, according to Demotech.
However, Ohio-based Demotech said that as of Dec. 2 it had not received Magnolia’s Sept. 30 financial report nor had it received a promised update of progress on the business plan implementation.
“It was our belief that the business plan and capital infusion were to be in process at this time,” said Demotech, although it says it has not been able to verify the actual status despite attempts to do so.
Coconut Grove-based Magnolia began doing business in April, 2008, with $20 million in capital and 100,000 policies shifted from state-run Citizens Property Insurance Corp.
Magnolia did not address specific issues raised by the suspension but issued a statement after being contacted by Insurance Journal:
“Magnolia Insurance Co. is in the process of correcting the situation that led to the suspension of our Demotech rating. Magnolia’s management team intends to work quickly and diligently to resolve this situation and expects to move forward as a stronger company with continued focus on serving the interest of our policyholders and agents.”
H. James Irl is president and chief executive officer of the company.
State insurance regulatory officials said they are aware of Demotech’s action and are themselves working with Magnolia to “resolve all outstanding issues” so that the company can pay all claims and policyholders are protected.
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