Florida property insurance company insolvent after Hurricane Ian losses

State regulators moved forward Thursday with placing United Property & Casualty Insurance Co. into receivership after higher-than-expected losses from Hurricane Ian helped push the insurer into insolvency.

Interim Insurance Commissioner Michael Yaworksy sent a letter to state Chief Financial Officer Jimmy Patronis to trigger a process that will lead to seeking court approval to place the St. Petersburg-based insurer into receivership, according to documents posted on the Office of Insurance Regulation website. United Property & Casualty agreed to the move.

United Property & Casualty has faced deep financial problems for months, including announcing in August that it would exit Florida's troubled homeowners' insurance market. Tampa-based Slide Insurance Co. on Feb. 1 picked up 72,000 of United Property & Casualty's policies.

In a Feb. 10 filing with the federal Securities and Exchange Commission, parent company United Insurance Holdings Corp. said United Property & Casualty was expected to be placed into receivership because of insolvency.

"United was deemed insolvent on February 6, 2023, because if all of the assets of United, if made immediately available, would be insufficient to discharge all of the liabilities of United. … (The Office of Insurance Regulation) has determined that United is operating in an unsound condition that is hazardous to policyholders, creditors, stockholders and the public," Virginia Christy, director of the office's Property & Casualty Financial Oversight unit, said in an affidavit attached to Yaworsky's letter.

The move to place United Property & Casualty in receivership is another blow to Florida's property-insurance market. The state placed six insurers into receivership in 2022 because of insolvencies.

United Property and Casualty had about 135,000 policies in Florida before Slide took over the 72,000 policies, according to a document filed Feb. 6 at the Securities and Exchange Commission.

The Office of Insurance Regulation letter Thursday and accompanying documents do not detail plans for remaining United Property & Casualty customers. The state-backed Citizens Property Insurance Corp. has provided policies to many homeowners who lost coverage because of last year's insolvencies.

While Slide took over the 72,000 policies, it is not liable for claims filed before Feb. 1 by former United Property & Casualty customers. The insolvency and receivership likely will lead to the Florida Insurance Guaranty Association needing to step in to help pay United Property & Casualty claims.

The agency was created to handle claims of insolvent companies and can collect assessments on policyholders throughout the state to cover the costs.

Christy's affidavit Thursday detailed years of concerns by regulators about United Property & Casualty's financial condition. It said the insurer had net underwriting losses of more than $35 million each year since 2017.

In July 2022, the company notified regulators that its financial rating had been downgraded to a level below what is required by the mortgage-industry giants Fannie Mae and Freddie Mac, which look at whether homes are insured by financially sound companies. That led to regulators placing United Property & Casualty in a new program that involved Citizens Property Insurance serving as a backstop.

A Dec. 5 order from the Office of Insurance Regulation for what is known as "public administrative supervision" said United Property & Casualty had been unable to obtain reinsurance — critical backup coverage — for the 2023 hurricane season. It said the insurer planned to cancel all remaining policies May 31, before the start of the season.

But in the Feb. 10 Securities and Exchange Commission filing. United Property & Casualty's parent company said the insurer had been hit harder than expected in Hurricane Ian, which made landfall Sept. 28 in Southwest Florida as a Category 4 storm and crossed the state.

The parent company issued a statement Friday that said United Property & Casualty was "heavily concentrated" in Southwest Florida and received about 25,000 claims from Ian. It said United Property & Casualty had purchased reinsurance in "accordance with industry standards and certain requirements."

"For more than two years, UPC has made every effort possible to return to profitability, remain a going concern, pay covered claims and handle claims with professionalism, while abiding by all regulations," the statement said. "Not only has UIHC (United Insurance Holdings Corp.) contributed $75 million in 2022 alone into its personal lines carrier (UPC) to mitigate losses and remain solvent, but it also attempted to reduce its liabilities by selling renewal rights in an effort to protect policyholders from UPC's continued deteriorating results."

The Feb. 10 Securities & Exchange Commission filing said United Property & Casualty had expected gross losses of $660 million from Hurricane Ian, but the actual losses were $864 million. After factoring in reinsurance, the higher-than-expected net loss was $145 million as of Dec. 31.

"As a result of the increased net losses incurred by UPC … UPC is expected to be insolvent as of December 31, 2022," the Feb. 10 filing said. "Accordingly, the company has notified the Florida Office of Insurance Regulation of UPC's material impairment."