Florida’s Heritage Insurance Holdings Inc. said it has it assumed approximately $59 million in annualized premium from the insolvent Sunshine State Insurance Co. Effective June 27, 2014, the policies were assumed by Heritage’s wholly-owned subsidiary, Heritage Property & Casualty Insurance Co.
In June, Leon County Judge Kevin Carroll approved the deal that allowed Heritage to assume the business of approximately 35,000 policyholders left without coverage due to the insolvency of Sunshine State (SSIC).
Heritage said it is pleased with the deal. On reason is that it will increase its agency force by 150.
“The hidden gem in the transaction is the addition of numerous high-quality agent partners,” said Mel Russell, chief underwriting officer.
“We added approximately 150 agencies to the Heritage agency group and they rank among the best producing agencies in Florida. The addition of these agencies will help to bolster our voluntary production and we are thrilled to have their full support,” Russell said.
SSIC had 500 agents in all.
Bruce Lucas, chairman and CEO, said another reason the company is pleased is that only five percent of the SSIC policies are located in in its most concentrated regions in Tampa Bay and the Tri-County in southeast Florida. As a result, he said Heritage “significantly improved its spread of risk, which will positively impact future reinsurance costs.”
Although its in-force premium jumped 23 percent as a result of the SSIC policies, Heritage’s probable maximum loss only increased about 11percent, company officials said.
Lucas said Heritage did not weaken its existing reinsurance standards in the deal. It purchased an additional $135 million in coverage from private reinsurers and the Florida Hurricane Catastrophe Fund, moves that increased its total reinsurance protection to $990 million.
“Due to the reinsurance synergies from the transaction, we were able to realize advantageous pricing for this additional coverage,” said Rich Widdicombe, president. He said the decision to add additional coverage was supported by the ratings firm Demotech Inc. and the Florida Office of Insurance Regulation. “Both parties deserve a lot of credit and were instrumental in providing a solution for consumers in this time of need,” Widdicombe said.
The Jacksonville, Fla.-based Sunshine State was taken over by the Department of Financial Services Division of Rehabilitation and Liquidation on June 3 after the state Office of Insurance Regulation reported the insurer could no longer meet the state’s capital requirements.
Sunshine State officials said that an accounting error related to its 2008 and 2011 catastrophic reinsurance treaties and a 2013 fourth quarter operational loss left the insurer in an untenable financial position.
Subsequent to taking over SSIC, the DFS held a bidding process that involved 10 companies that were evaluated based on a number of criteria including rates, surplus, catastrophic coverage and other financial considerations.
As a result, the Clearwater, Florida-based Heritage secured the non-exclusive rights to assume Sunshine State’s residential homeowner and condominium book of business.
Under the terms of the deal, Heritage offered all the affected Sunshine State policyholders coverage without them having to file new applications. Heritage continued to use Sunshine State forms and rates and will until policy renewal, at which time the policyholders will be offered the lower of Sunshine State or Heritage rates.
Sunshine State policyholders are not being asked to pay any new premiums while waiting for a refund of any unearned premiums from the insurer’s estate. Also Heritage is being allowed to retain any unearned Sunshine State premiums.
Heritage has agreed to pay a $100 deductible that the state guaranty fund is required to collect from all Sunshine State policyholders as part of an offset for assuming open claims.
Heritage has been taking steps to actively retain all agents that have been marketing Sunshine State policies by agreeing to retain any unearned commissions that otherwise agents would have paid back to Sunshine State’s estate.
Before the SSIC deal, Heritage had approximately $250 million in premiums, with $125 million in surplus and an additional $85 million in reserves.
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Topics Florida Agencies Reinsurance
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