Florida’s Northern Capital to Be Liquidated; All Policies End May 30

April 13, 2010

Judge James O. Shelfer of the Second Judicial Circuit Court of Florida has ordered Miami-based Northern Capital Insurance Co. (NCIC) into receivership for the purpose of rehabilitation.

At the same time, the court ordered the subsequent liquidation of the company, effective May 1, 2010. The Department of Financial Services (DFS) was named receiver.

Regulators requested the combination of the rehabilitation followed by liquidation to allow DFS additional time to assist NCIC’s 62,000 policyholders in obtaining replacement property/casualty insurance coverage prior to the beginning of the 2010 hurricane season. Forecasters are predicting an above-average hurricane season starting June 1.

NCIC, a Florida corporation licensed in 2006, primarily wrote homeowners, automobile and inland marine policies in Florida.

During the rehabilitation phase prior to May 1, 2010, NCIC’s policies remain in effect and DFS will continue to process and pay claims to the extent possible.

Under the liquidation order, which is effective on May 1, 2010, all NCIC policies will be cancelled as of 11:59:59 p.m. on May 30, 2010, unless otherwise terminated prior to that date.

Upon liquidation, property and casualty insurance policies will be covered by the Florida Insurance Guaranty Association. However, until 11:59:59 p.m. on May 30, 2010, consumers should continue to call NCIC’s customer service department at 1-888-449-0140 for all questions relating to NCIC policy and coverage issues.

The court ruling was expected. The Office of Insurance Regulation (OIR) had placed the insurer under close watch last May and monitored it as its finances deteriorated and its management was unable to attract additional capital or find another carrier to purchase it.

Last December, Northern Capital and its affiliate, Northern Capital Select Insurance Co., stopped writing any new business and soon thereafter stopped renewing existing policies as the companies’ surplus had reached the minimum level.

By Feb. 19, Northern Capital reported it had been under-reserving for claims by about $6.4 million, which impaired its surplus even further, dropping it below the $4 million minimum required by the state.

At that time, the company lost its financial stability rating rating from Demotech.

State regulators had expressed concern about a high concentration of business in Dade, Broward and Palm Beach counties.

Northern Capital began writing in the state in 2006, one of a few dozen domestic insurers that started-up after other insurers left in the wake of Hurricane Andrew. Northern Capital was named the fastest growing small company in the nation by Inc. Magazine in 2009.

The state has seized four other property insurers within the past year —Magnolia, Coral, American Keystone and First Commercial— while another remains under state supervision.

Earlier this week, Olympus Insurance was told it could lose its license if it does not cut back on business, boost its reinsurance and explain some if its accounting.

In another rescue, Florida Peninsula Holdings agreed to acquire Edison Insurance. The situation has alarmed insurance agents, consumer groups and some lawmakers.

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