Vesta liquidation by Texas felt from Florida to Mass.

Some 70,000 Florida, 150,000 Texas, 5,200 Massachusetts and 11,000 New Jersey policyholders are among those affected by the liquidation of Vesta Fire Insurance Co. and its subsidiaries.

Texas regulators placed the company into liquidation in July and its affiliates are issuing notices to agents to cease writing new and renewal insurance business. Also all policies with the companies will be canceled on Aug. 23 in most states.

Vesta is the parent company of four Texas-domiciled insurers: Texas Select Lloyds Insurance Company, Vesta Insurance Corp., Shelby Casualty Company and Shelby Insurance Company.

Texas Insurance Commissioner Mike Geeslin said Vesta’s problems include a series of hurricane losses driving a long-term need for capital. Negotiations with potential buyers for certain Vesta insurers failed.

“We moved in this direction simply because the company did not have the capital to cover the risk to which they were exposed and we felt policyholders were at risk,” Texas department spokesman Jim Hurley said.

Regulators in Hawaii and Florida have also taken control of Vesta subsidiaries–the Hawaiian Insurance & Guaranty Company Ltd. (HIG) and Florida Select Insurance Company.

Florida Select, a Florida corporation that was licensed in 1996, is headquartered in Birmingham, Alabama and has additional offices in Sarasota, Florida. Florida Select was writing homeowner’s multi-peril, allied lines, and fire insurance coverage. Florida Select has approximately 70,000 homeowners policies in Florida. The company also writes business in South Carolina.

Hawaii Insurance Commissioner, J.P. Schmidt said HIG policies were not being canceled and circumstances may not be dire in his state.. “We were able to obtain reinsurance to cover the book of business for HIG so that the people would have cover,” he said.

Agents in Texas are finding some insurers coming to the rescue. Both the Independent Insurance Agents of Texas and the Professional Insurance Agents of Texas have lists of companies willing to take over some of Texas Select’s business on their web sites.

But in Florida, agents are not so fortunate.

“We cannot afford to have more policies canceled or non-renewed. Citizens really can’t take on any more and they are trying to do their best–you really have to give them credit,” said Dulce M. Suarez-Resnick, past president of the Latin American Association of Insurance Agencies Inc. in Miami.

She said insurers have tightened their underwriting guidelines or reduced the number of policies they write. “It’s a prudent thing to do considering the past two storm seasons and the predicted storm season ahead. They don’t want to end up like the five companies that have faced solvency issues due to the 2004 and 2005 hurricane seasons.”

According to Suarez-Resnick, time is a factor. “We are urging people not to wait until Aug. 23 to move their business. Agents are working very hard to make their policyholders aware of this and are moving their customers as rapidly as possible,” she said.

In February, A.M. Best downgraded the company’s subsidiaries’ ratings to C++ (Marginal) from B (Fair). Best’s said Vesta’s capital and surplus had declined over recent years due to higher than anticipated losses from the 2004 and 2005 hurricane seasons, combined with other declines in statutory surplus attributable to changes in accounting estimates. While Vesta successfully executed several capital enhancement plans, which included the sale of its life insurance and automobile insurance operations, hurricane losses largely offset the surplus realized through those transactions.

Topics Florida Carriers Texas Agencies Massachusetts Hurricane