Florida Regulator: Olympus Insurance Must Take Corrective Action or Face Suspension

Olympus Insurance Co. must present a corrective action plan to the Florida Office of Insurance Regulation by May 7, or the company will be suspended, according to an order from the OIR. The regulator said the insurer cannot withstand an event without becoming insolvent.

The Orlando, Fla.-based homeowners insurance company continues to write new business in excess of what it can support -- at the same level as when the insurer had $50 million in surplus, the OIR said. The company told the OIR it expects a profit in 2010 but regulators estimate at least a $7 million loss in 2010, bringing surplus down to $14 million. The OIR said Olympus' "retention level and cost to reinstate exhausted reinsurance is not at acceptable levels of risk for the insurer because one event would render Olympus unable to purchase additional coverage for a second event without becoming insolvent," the order states.

Olympus in 2007 announced it would start writing in Florida after getting a 20-year surplus note for $16.5 million from the state's Capital Build-up Incentive Program. The company put $33.5 million in capital to reach $50 million (BestWire, Aug. 13, 2007).

Attempts to reach Olympus for comment were not immediately successful.

Part of the corrective action plan will be an amended agreement between Olympus and its affiliated managing general agent, Olympus MGA Corp. A plan approved by the OIR showed a 22% commission to the MGA but Olympus has been paying 34% to the MGA. The agreement between Olympus and its MGA has "contributed to the insurance company consistently generating underwriting losses," the order says. Olympus has already submitted a new agreement, according to the order.

The OIR is also demanding Olympus receive a capital infusion from its holding company, Gemini Financial Holdings Corp.

Ranked 33rd among Florida's residential property writers in 2009, Olympus reported $21.1 million of surplus at the end of 2009, down nearly $13.5 million. Net income was $3.6 million. The company has about 51,160 policies in force, according to OIR data.

The company is the latest Florida domestic property insurer to face an order from the OIR.

The OIR is currently examining all annual reports from the state's insurers and thus far orders and/or fines have come down against Homeowners Choice Property & Casualty Insurance Co. for failing to inform the office of the company's reinsurance plans with an affiliated company (BestWire, March 18, 2010); Southern Oak Insurance Co. to reduce commissions it paid to an affiliated managing general agent (BestWire, March 15, 2010); and Hillcrest Insurance Co. to return an investment in a failed bank its part-owner had founded (BestWire, March 29, 2010).

The OIR also sent Northern Capital Insurance Co. into receivership after declaring it insolvent (BestWire, April 8, 2010). Last year, three companies in Florida were put into receivership: Coral Insurance Co., American Keystone Insurance Co. and First Commercial Insurance Co. -- a writer of workers' compensation and commercial automobile insurance.

The top five writers of homeowners multiperil in Florida in 2008, according to BestLink, were: State Farm Group, with a 17.7% market share; Citizens Property Insurance Corp., with 16.2%; Universal P&C Insurance Co., with 7.2%; USAA Group, with 5.1%; and Tower Hill Group, with 4.5%. BestLink provides online access to A.M. Best's Global Insurance & Banking Database.

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)