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Florida Takes Control of Yet Another Insurer

Florida Insurance regulators said Wednesday they have taken over a third property insurer as the industry continues to respond to tough economic times.

Under a consent decree penned Dec. 14 by the Office of Insurance Regulation, the state will take over Magnolia Insurance, a Coconut Grove-based insurer with 100,275 policies. The receivership will last for 120 days but can be extended.

Earlier this month, insurance company rating agency Demotech suspended its rating for Magnolia after it failed to provide financial data on efforts to raise more capital and improve customer service. In response, CEO H. James Irl resigned.

An OIR spokesman said Wednesday that some policyholders may end up being assigned to Citizens Property Insurance Corp. but other options are available. The company is not being liquidated at this time. Instead, the agency will work with Magnolia to determine if it can get back on its feet.

“If the Office cannot help Magnolia regain a solid financial footing, there are other options like considering offers to purchase the company, or have another company/companies assume the book of business,” OIR spokesman Jack McDermott told the News Service. “However, it is a possibility that some of these policies could one day be written by Citizens.”

Magnolia is the 12th largest property insurer in the state with more than $24 billion in exposure, including 44,000 policyholders in Palm Beach, Broward and Miami Dade Counties, McDermott estimated.

The company joins two other property insurers -- American Keystone and Coral Insurance – that have been were placed under state receivership during the past year.

Another insurer, First Commercial, has also been place under receivership. It provides workers’ compensation coverage.

Sam Miller, spokesman for the Florida Insurance Council, said the vast majority of property insurers remain solid despite recent losses due to non-hurricane events. But the current environment has been too tough for some companies and industry officials are anticipating that a handful more will meet a similar fate.

“It is possible action by OIR will be necessary involving other insurers, but hopefully, the number will be limited,” Miller said “OIR is moving to allow insurers to raise rates when necessary to improve their financial situations.”

So far, OIR has been able to place most policyholders with other companies and not been forced to increase the ranks of state-run Citizens, the largest property insurer in the state with more than 1 million policyholders.

But financial reports for the 3rd quarter show companies experienced hundreds of millions in losses. Industry officials are expecting similar news when 4th quarter figures are released in January.

“Companies, period, are not making the profit they should be making and amassing the surpluses they should be making” (in non-hurricane years), Miller said.

3 Responses »

  1. The insurance industry is not responding to tough economic times. It's responding to a "cockamamie" insurance strategy by Charlie Crist. The problems facing Florida property insurers have a whole lot more to do with Charlie "what do the polls say" Crist than the economy.

    Crist is the one who forced insurers to double their wind mitigation discounts overnight without actuarial justification. Crist is the one who has said "good riddance" to the larger property insurers who actually have the capital and outside reinsurance to pay their hurricane claims. Crist is the one responsible for the lowering of capital reserve requirements for new Florida insurers who will go belly up at the first hurrciane - if not sooner. Crist is the one who expanded Citizens and the Cat Fund leaving the people of Florida unknowingly on the hook for billions it can't repay.

    The problem is Charlie Crist. The industry is repsonding to a stupid strategy of a governor whose main focus is getting elected to the US Senate. Crist doesn't care if the Florida Cat Fund will be $18 billion short after the first storm. He's just praying it won't happen while he's Governor. In the meantime, we'll continue to see these fly-by-night insurers like Magnolia come into the market and fail, and create huge headaches for Florida consumers -and give the insurance industry another black-eye.

    Get Charlie Crist out of the insurance business and out of politics. He's a poster child for bad govt.

  2. Thats funny while you were on your soapbox I did not hear you mention your strategy? I did not think so rush to make judgement but not make a offer of resolve. While you are right I think Christ is bad politics he is elected by the majority who feel it is an issue and they want nothing more than a quick fix because they will not be here much longer.
    Today I was told that I could not write Olympus insurance anylonger is this another one that is headed to the bottom. Cheap rates, but hey what is wrong? I would have a line out the door if I could write Nationwide all day and not blink an eye(for any price). Do not point fingers, but figure on how you can manipulate the system to get what you want, that is all they are doing.

  3. Hi Ryan,

    Are you saying your contract was terminated with Olympus? Olympus' financial stability is one of the strongest out there at this time in terms of start-up companies (and they didn't do any take outs), and they are currently writing a good amount of business, especially here in the Northeast. I do know that Olympus is refining their agency base and seems to be getting more strategic about their agency appointments, so perhaps it was simply a business decision that you can no longer write with them.