Failed Insurance Companies in Florida – Who’s Next?


The Florida homeowners insurance market is in a precarious and precarious situation. No hurricane has hit Florida since then 2018However, there have been seven insurance company bankruptcies in Florida in recent hurricane-free years, including three so far this year. tornado Andrew, which caused insured losses of $31 billion (inflation-adjusted) in 1992, also caused the collapse of seven Florida insurers three decades earlier. If seven Florida insurance companies fail in the current hurricane-free period, how many Florida insurance companies will fall when the inevitable hurricanes return to the peninsula and the ruler?

1992-1993 Failures of Hurricane Andrew The number of home insurance policies 2017-2022 (until April 28) The number of home insurance policies
Regency insurance 10902 Federal National Insurance (downgrade) 152000
MC Algiers insurance 12000 St. John’s Insurance company 140,000
amazing Republic Insurance Company 5,395 Avatar Property & Casualty Insurance 42000
Ocean Accident insurance company 21000 Gulf Stream Property and accident insurance company 33,000
Florida Fire and Accident Insurance Company 11000 American Capital Insurance Corporation 2300
Nova Southern Insurance Company 9300 Florida Professional Insurance Corporation 90,000
guardian Property and accident insurance company 9355 sograss Cooperative Insurance Company 17778

When looking at the insurance company’s failures after Andrew compared to today’s issues, there are some troubling concerns. The seven Florida insurance companies that fell in 1992-1993 were small, lightweight, and lightweight companies, with nearly 80,000 insurance policies combined. Recent failures included even greater Insurance companiescumulatively covering 461,000 policyholders, nearly 5 percent of the Sunshine State’s housing stock. What’s more, Hurricane Andrew spurred the development and use of data-driven disaster models that enable insurers to understand and manage their exposure to natural disaster events. After Andrew, insurers had a much better sense of their risk buildup, and became more sophisticated in their purchases of reinsurance to protect against concentrations of exposure that could lead to large losses. But with all the risk management tools in place today, insurance companies are falling apart more than they did in the days before modeling.

The failure of property and casualty insurance companies is rare. Insurance companies usually have tight balance sheets, with assets several times their annual revenue to generate investment income, and to offset underwriting losses. In the entire P&C industry, with nearly 2900 In the United States, the number of annual vulnerabilities is usually in the low to medium single digits, or 0.2 percent of the total population. There have only been five cases of decline in personal property insurers and US accounts in 2019four inches 2018 and seven inches 2017. The fact that there are now so many Florida insurance companies that fail each year while the state has been spared from landfalling hurricanes should be cause for concern.

When middle weights fall

Another disturbing feature of the current series of Florida insurance company failures is that one of the downfalls is the publicly traded Federal National Insurance (FedNat), a mid-weight carrier with 584 million dollars In 2021 net written premiums. In its 2021 10-K form, released April 25, 2022, FedNat mentioned “The Company has recently concluded that there is a material doubt as to its ability to continue as a going concern under GAAP.”

Most of FedNat’s business is in Florida, but they had the misfortune of writing homeowners insurance in Texas and Louisiana as well — states hit by storms in 2021 (winter storm ori And the Hurricane Ida). The FedNat Group holdings include three insurance companies: FedNat Insurance, Monarch National Insurance Company, and Maison Insurance Company. Florida calculated FedNat’s premiums are 71.1 percent, followed by Texas with 13.0 percent, Louisiana with 7.2 percent, South Carolina at 6.5 percent and Alabama with 1.6 percent.

FedNat’s downfall isn’t just attributed to Ori and Ida. The company has been underwriting poorly for years before 2021. The combined ratio, a measure of underwriting profitability or lack thereof, has been raised with significant underwriting losses in four of the past five years. A combined ratio of more than 100 percent indicates an underwriting loss, with losses and expenses on premiums increasing.

year Combined Ratio (%)
2017 110.0
2018 98.4
2019 110.0
2020 145.1
2021 185.1

(source: Standard & Poor’s International)

There is no simple solution

We have analyzed the root cause of the insurance crisis in Florida, and provided recommended responses in a recent article and Blog post. Our analysis concludes that the cause of Florida’s insurance crisis is not the weather. It is a man-made crisis, not a natural disaster crisis. It is an explosion in litigation made possible by a legal and legislative climate that has increased the frequency and severity of the loss to the breaking point.

In the past decade, the Florida insurance market has stumbled from crisis to crisis, spurred by litigation surrounding holes, mold, building defects, water damages, one-way attorney fees, allotment of benefits, and unscrupulous roofing contractors. Like a very ill patient with many comorbidities, there is no simple treatment that can solve Florida’s insurance chaos. The Florida legislature plans to have a special system session During the week of May 23 to address and address these issues. The issue is likely to be too complex to expect meaningful solutions to emerge this month, but we can hope for constructive dialogue and fact-based analysis. But the question now is: Who will be the next to fall?

Top 25 Insurance Companies in Florida 2021 Direct Written Premium (in millions of dollars)
Comprehensive property and casualty insurance 1300
Citizens Insurance Company 1,260
State farm insurance 827
Tower Hill Insurance Group, LLC 642
progressive insurance 541
United States of America 509
First Preventive Insurance Company 482
HCI Group, Inc. 482
Florida peninsula insurance company 466
Heritage Insurance 405
UPC insurance 401
Vidanat Insurance Company 362
Securing American Integrity 345
like 338
Allstate Insurance Company 322
Security First Insurance Company 306
AIG 263
Tokyo Marine HCC 218
Olympus Insurance Company 204
Securing the confidence of the people 194
Farmers Insurance 184
Automobile Club of Florida Insurance Company 145
South Farm Office 142
Florida Family Insurance Company 139
Southern Oak Insurance Co 132

(source: Standard & Poor’s International)

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