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.