United Property & Casualty Insurance Co. has exited Florida’s troubled homeowners insurance market, forcing customers to find new coverage as their policies come up for renewal, the insurer’s parent company recently announced.
The St. Petersburg-based United Insurance Holdings Corp. said it has filed plans to withdraw from what are known as personal-lines markets in Florida, Texas and Louisiana. It also will file a withdrawal plan in New York.
A news release from the parent company said the plans would “effectively place United P&C into an orderly run-off,” which means policies will be gradually dropped as they come up for renewal. The announcement pointed, in part, to problems in obtaining reinsurance, which is critical backup coverage to help handle such things as hurricane claims.
“Due to significant uncertainty around the future availability of reinsurance for our personal lines business, I believe placing United P&C into an orderly run-off is prudent and necessary to protect the company and its policyholders,” said United Insurance Holdings Chairman and CEO Dan Peed.
The parent company said in July that it had started a “review of its strategic and capital raising alternatives” amid financial losses. The Demotech financial-rating agency later downgraded United Property & Casualty from an “A Exceptional” rating to an “M Moderate” rating.
United Property & Casualty is the latest insurer to leave the Florida market or dramatically scale back coverage amid losses. As indications of the troubles, five property insurers have been deemed insolvent since February, and the state-backed Citizens Property Insurance Corp. has ballooned to more than 1 million policies, as many homeowners have few other coverage alternatives.
During a state Cabinet meeting last month, Insurance Commissioner David Altmaier acknowledged Florida is dealing with a “very challenging market.” But he said the state has taken a “significant number of positive steps in addressing this crisis” with legislation passed in recent years and during a May special session.
“As we have said numerous times before, there is no overnight fix to this insurance crisis. It’s been years in the making, unfortunately,” Altmaier told Cabinet members and Gov. Ron DeSantis. “But the steps we have taken so far under your leadership are going to be significant steps forward into addressing this issue.”
In addition to difficulties obtaining reinsurance, property insurers have blamed large numbers of lawsuits in Florida for financial problems. Florida, Louisiana and Texas also are prone to getting battered by costly hurricanes.
“Extreme weather, coupled with runaway litigation, is the reason for this announcement,” insurance lobbyist and former regulator Lisa Miller said Thursday of the United Property & Casualty decision.
After the initial Demotech downgrade of United Property & Casualty, the state Office of Insurance Regulation on Aug. 2 put the company into a new stopgap program aimed at making sure coverage would continue for homeowners.
The program involves Citizens Property Insurance acting as a financial backstop for private insurers that get downgraded. Citizens took on a reinsurance role to help make sure claims get paid if insurers go insolvent.
Financial ratings are important, in part, because mortgage-industry giants Fannie Mae and Freddie Mac require homes to be insured by financially sound companies. For insurers rated by Demotech, Fannie Mae and Freddie Mac require “A” ratings or better.
The Demotech downgrade of United Property & Casualty put the insurer below an A rating. The state’s stopgap program is designed to satisfy Fannie Mae and Freddie Mac in such situations. It uses an exception in Fannie Mae and Freddie Mac standards that applies when reinsurers take responsibility for paying claims if insurers go belly up.
