TAMPA, Fla. — The Florida Office of Insurance Regulation referred FedNat Insurance company into receivership for the second time this year, stating the insurer is "operating in an unsound condition" and poses a hazard to policyholders.
FedNat entered receivership in May but did not go into liquidation. The company was rehabilitated, dropping about 56,000 policies and keeping 83,000.
The order, dated Sept. 21, states, "FedNat was deemed insolvent on September 14, 2022, because it is unable to pay its debts at they become due in the normal course of business."
According to the order, issues arose in March of 2020, when FedNat showed a significant drop in income and negative underwriting results totaling nearly $39 million dollars, in addition to continued catastrophic weather events in Florida, Texas, Louisiana and other states.
By the end of 2020, the company had nearly $100 million in underwriting losses and their surplus funding continued to decline.
In May of 2021, OIR issued a consent order including the early cancellation of 56,500 of the FedNat's 140,000 Florida residential policies. 83,000 remained in a runoff, as the company merged into Monarch National Insurance.
Furthermore, the order states, "On September 13, 2022, the Office was notified by a representative of FedNat that, despite all the filings, proformas, and documentation provided to the Office to support the plan... its proforma cashflow projections both grossly underestimated cash outflows and overestimated reinsurance recoveries, thereby overstating projected cash balances. As a result, the cash flow projections provided to the Office to support the solvent runoff were materially incorrect. FedNat reported that it had inadequate resources to fund a solvent runoff."
Once a judge signs off on the order, policyholders will have 30 days to find a new insurance company. However, because this is taking place during a named storm, homeowners may have to wait to get a new policy.