FedNat insurance holding firm files for Chapter 11 bankruptcy [South Florida Sun-Sentinel] – InsuranceNewsNet

FedNat Holding Co., a Sunrise-based householders insurance firm, has filed for Chapter 11 bankruptcy safety in Fort Lauderdale after succumbing to monetary pressures generated by extreme climate occasions, industrywide lawsuits and the position of its property insurance unit right into a receivership.

The firm and a number of other associates will proceed to function, the petition says, and can use Chapter 11 “to explore all value maximizing propositions for creditors including potential asset sales.”

FedNat mentioned it already has begun negotiating with an unidentified third celebration “to submit an asset purchase agreement … relating to a sale or sales in short order,” in keeping with an affidavit filed by its chief restructuring officer, Katie Goodman of Atlanta.

Founded in 1992, the corporate mentioned it has $6.5 million in money readily available to fund its day-to-day enterprise, pay workers and repair coverage holders.

The petition doesn’t determine the belongings to be offered.

FedNat is an underwriter and claims processor whose purchasers are insurance corporations that write householders insurance policies. Many of these companies, together with its greatest buyer and wholly owned subsidiary, FedNat Insurance Company, accrued massive losses through the years.

FedNat’s monetary troubles began to snowball after Florida’s Department of Financial Services compelled the subsidiary into receivership earlier this yr. In May, the division, which acted as receiver, canceled 56,500 insurance policies and organized to switch about 83,000 insurance policies to a different firm, in keeping with stories.

FedNat, nevertheless, remained on the hook for claims and different obligations. In September, it knowledgeable the state that it lacked the funds to cowl so-called “runoff” obligations.

“Additionally, the debtors have been severely impacted by, among other things, an elevated number of severe weather events giving rise to catastrophe losses [particularly losses stemming from FNHC’s non-Florida books of business], rate issues, and litigation abuse,” Goodman wrote in an affidavit accompanying the bankruptcy court docket petition.

FedNat’s greatest creditor is Bank of New York Mellon, which holds two loans price greater than a mixed $130 million, in keeping with the petition. The state Department of Financial Services is the second largest creditor with a disputed declare of almost $41 million. The nature of the declare isn’t recognized.

The bankruptcy submitting got here at some point earlier than the Florida Senate opened a particular session on Monday to handle the state’s insurance disaster.

A report by the rankings company AM Best describes “how large national insurance companies have dramatically limited coverage they are willing to write in Florida,” in keeping with the News Service of Florida.

Five writers of householders’ insurance account for greater than 50% of premiums written in different states, however solely 5% in Florida.

“Public policy initiatives need to consider how to make Florida attractive to national insurers and reinsurers, to incentivize them to expand their appetite for Florida risks,” the report mentioned. “Absent that, a lack of competition may continue to fuel affordability issues for primary insurers with respect to reinsurance and consumers in need of basic homeowners’ coverage.”

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