Two financially troubled Florida-based property insurers with about 67,000 policies statewide have agreed to be taken over by larger, more stable companies.
The absorption of 43,000 homeowner policies from Anchor Property & Casualty by HCI Holdings, and the takeover of Centauri Specialty Insurance Co. and its 24,000 policies by Avatar Partners LP, follows warnings that up to 18 Florida-based insurers soon could lose their top financial stability ratings.
Joe Petrelli, president of ratings agency Demotech Inc., had warned recently that two to four Florida-based companies would be downgraded from A-Exceptional by mid-January. Downgrades, while not necessarily a mark of insolvency, can be problematic for policyholders with federally backed lenders that require insurance only from A-rated carriers.
Demotech on Tuesday announced it had downgraded Anchor’s rating from A-Exceptional to M-Moderate. But that won’t matter to Anchor’s customers, including more than 11,000 in South Florida, after Tampa-based HCI Group finalizes its agreement for its subsidiary Homeowners Choice Property & Casualty Insurance Co. to acquire the Anchor policies. Anchor is based in St. Petersburg.
Demotech announced that Sarasota-based Centauri Speciality Insurance Co., which has more than 24,000 customers in Florida and 9,826 in South Florida, would retain its A rating after agreeing to be acquired by Avatar Partners LP, parent of Tampa-based Avatar Property & Casualty.
Financial terms were not disclosed for either deal. Prior to the announcement, Homeowners Choice was one of the 20 largest insurance companies in the state with more than 108,000 policies. It will likely move into the top 10 after the deal is complete. Avatar, meanwhile, had about 57,000 policies, according to a tally by the state Office of Insurance Regulation.
Decisions about other companies likely will take place in February and March, in conjunction with deadlines for those companies to file their year-end financial statements, Petrelli said.
The Florida Office of Insurance Regulation “is working with the companies to ensure consumers have seamless access to coverage,” agency spokeswoman Alexis Bakofsky said by email. HCI’s takeover of Anchor should be finalized by mid-February, she said. Avatar did not respond to requests for comment Thursday.
The Centauri acquisition must be approved by the agency, but it has not yet received a formal proposal, Bakofsky said.
The potential for ratings downgrades for up to 18 companies stems from the convergence of numerous pressures in Florida’s marketplace, Petrelli said this week, including heavier than projected claims activities from recent hurricanes and other extreme weather events, a failure to seek regulators approval for rate increases at levels high enough to fund incoming claims, plus numerous years of escalating rates of litigation.
Remedies suggested by Demotech for companies that want to retain their A financial stability ratings include increasing annual rates more than 15 percent.
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