FedNat Has Until Friday to Submit Improvement Plan, Florida OIR Says

The Florida Office of Insurance Regulation has given FedNat Insurance a week to come up with a plan to improve its financial footing, after the company’s stability rating was downgraded to level that is not recognized by the secondary mortgage market.

In a consent order signed Friday by Insurance Commissioner David Altmaier and executives with FedNat and its sister companies, the companies must file a strategic plan to acquire additional capital, improve FedNat’s rating and obtain sufficient reinsurance by its July 1 renewal date.

The Demotech rating firm on April 14 downgraded FedNat’s stability rating from “A exceptional” to “S substantial,” citing heavy losses after storms hit Texas and Louisiana in 2021. The rating indicates that the carrier continues to have substantial resources and is not in imminent danger of collapse, Demotech’s president said.

But an “S” rating is not recognized by Fannie Mae and Freddie Mac, the government-sponsored purchasers of home mortgages.

“If FedNat’s policies are no longer acceptable to the secondary mortgage market, at renewal, policyholders may be required by the lender to obtain replacement insurance coverage,” the OIR consent order explained.

The order noted that FedNat is a domestic property and casualty insurer in Florida, along with its sister company, Monarch National. Another company held by FedNat Holding Co., Maison Insurance Co., is a foreign insurer, domiciled in Louisiana. OIR said that while FedNat had its rating trimmed, Monarch’s rating of “A” had remained the same and Maison is not rated by Demotech.

Together, the three had 152,000 policies in force in Florida at the end of March, and about 96,000 policies, mostly for homeowners, in Alabama, Louisiana, South Carolina, Texas and Mississippi.

The consent order did not explain why Monarch and Maison were included in the directive. Publicly traded FedNat Holding Co., which reported a $103 million loss for 2021, has already announced several measures to improve its bottom line, including pulling out of Louisiana and Texas and running off its Maison operations.

Shoring up its capital investments also is in the works.

“The companies and FedNat Holding Co. have represented that they are in active negotiations with multiple parties regarding potential agreements for additional capital and the implementation of a strategic reorganization plan designed to provide for long-term stability,” the consent order reads.

The companies have until Friday, April 29 at 5 p.m. Eastern time to submit the plan. It must include projections for the next 30 months, a cash-flow analysis and a catastrophe reinsurance program. FedNat has waived its right to have a hearing on the matter, OIR said.

The order was signed by Michael Braun, president of FedNat and Monarch, and by Maison’s treasurer, Erick Fernandez. They could not be reached for comment Monday morning. FedNat is headquartered in Sunrise, near Fort Lauderdale.

FedNat Holding’s stock price has fallen steadily in the last month, from $1.39 a share on March 24, to just 53 cents on Monday, April 25, according to Yahoo Finance and other market tracking sites.

Topics Florida