37K Customers Of Insolvent Florida Insurer Must Find New Coverage Soon

Avatar, based in Tampa, insured 37,000 homeowners when it was ordered into receivership on March 14. The liquidation order followed the withdrawal in February of Avatar’s financial stability rating by analysis firm Demotech.

Avatar had 38,282 policies at the end of 2021, according to data compiled by the Florida Office of Insurance Regulation. Of those, 10,592 were in Broward, Palm Beach and Miami-Dade counties. Another 2,462 were in Orange, Seminole, Lake and Osceola counties.

Agents are scrambling to find new insurers for their clients.

“Yes, we are pulling our hair out right now,” said Dulce Suarez-Resnick, vice president at Acentria Insurance in Miami.

Kyle Ulrich, president and CEO of the Florida Association of Insurance Agents, said agents are “doing everything they possibly can to find private-market alternatives for them.”

A bulletin sent by Avatar to insurance agents identified a handful of companies that expressed interest in covering some of the displaced homeowners. They are Security First, Florida Peninsula and Cypress Insurance.

Ryan Papy, president of the Palmetto Bay-based Keyes Insurance agency, said his agency is working to relocate hundreds of policies out of Avatar.

Most Avatar customers unable to get a coverage offer from a private-market company will be able to sign up with state-owned Citizens Property Insurance Corp., the so-called insurer of last resort, Ulrich said.

One problem agents are discovering is that Avatar’s rates were significantly lower than most former competitors, he said. Policyholders can opt to be placed with Citizens as long as no other company offers comparable coverage for less than 20% more than what Citizens charges.

In addition, seven insurers have stopped writing new business in the state since January, while other are non-renewing existing policies if the homes are past a certain age or their roofs are more than 10 years old.

So far, 150 former Avatar policies have been absorbed by Citizens and another 250 are in the application process, said Citizens spokesman Michael Peltier.

Ulrich predicted 75% of the Avatar policies will end up with Citizens, just as Citizens’ governing board and state lawmakers are worried that Citizens is growing too large. The company now has more than 800,000 policies — nearly twice as many as in 2018.

According to Suarez-Resnick, “The market of last resort is the market right now.”

Insurance industry leaders see the Avatar failure and the high Citizens population as symptoms of deep financial problems within the private insurance market. Nearly all carriers have raised their rates significantly over the past two years, while Florida-based carriers as a whole collectively reported more than $1 billion in net losses in 2021.

Insurers blame a combination of higher-than-expected hurricane losses, fraudulent roof claims driven by contractors and their attorneys, and litigation rates that far exceed those of any other state.

Avatar was the fourth Florida-based insurer over the past year to go out of business. The others were American Capital Assurance Corp., in April 2021; Gulfstream Property & Casualty, in July 2021; and St. John Insurance Co., in February.

Now under control of the Department of Financial Services’ Division of Rehabilitation and Liquidation, Avatar’s website redirects to a page with key dates and deadlines, along with frequently asked questions about the dissolution and what policyholders should expect. The page can be accessed directly at avatar-liquidation.com.

It states that Avatar policies will be canceled as of 12:10 a.m. on April 13 unless otherwise terminated prior to that date.

Policyholders are advised to contact their agent about their insurance options. Refunds for whatever was left of policyholders’ terms will processed by the Florida Insurance Guaranty Association within 30 to 60 days after policies are cancelled. Policyholders are not required to take any action or submit any information.

Still, the 30- to 60-day wait means that many policyholders will have to pay for their new policies before getting their refunds, Ulrich said.

The web page also notes that premium refunds will be sent directly to policyholders, even if their premium was paid directly by their mortgage servicer.

However, if policyholders are owed money for services provided prior to the liquidation, they should contact the receiver by phone at 404-465-2814, by writing Avatar Property & Casualty Insurance Company, P.O. Box 519, Stuart, VA 24171.

Processing of claims filed prior to April 13 might be delayed during the transition period, the website states, while all lawsuits or administrative proceedings against the company have been suspended during the liquidation process.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at rhurtibise@sunsentinel.com.

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