Florida OIR Wants Longer Notice on UPC’s Policy Cancellations for Runoff

United Property & Casualty Insurance Co., now within the midst of an orderly run-off after years of heavy losses, had deliberate on giving 60 days cancellation discover to insurance policies nonetheless in pressure as of May 31, 2023. But Florida regulators at the moment are requiring 120 days’ discover.

“It’s good to see that policyholders will be given 120 days notice and it’s good for agents to have more time on that,” stated Kyle Ulrich, president of the Florida Association of Insurance Agents.

Florida Insurance Commissioner David Altmaier this week signed off on a consent order, revising UPC’s runoff plan and tightening oversight of the troubled firm. UPC introduced in August that it was pulling out of a number of states, together with its residence state of Florida, and would non-renew most of its insurance policies.

The Florida Office of Insurance Regulation consent order famous that as of Nov. 1, UPC had about 142,785 insurance policies in pressure in Florida, and would nonetheless have some 70,287 in pressure on May 31. The service’s runoff plan, submitted in mid-November, stated it might give two months’ discover to these remaining policyholders.

But two months’ discover, whereas greater than statutorily required, shouldn’t be sufficient, Altmaier’s workplace stated.

“As a condition of approval for the early cancellation of its policies in Florida that will not have been nonrenewed prior to June 1, 2023, United must provide affected policyholders in Florida with at least 120 days’ notice of cancellation, instead of the 60 days notice contemplated” within the firm’s proposed plan, the order reads.

UPC additionally should submit its cancellation notices, policyholder notices and agent notices to the OIR for approval.

United additionally reported in its preliminary plan {that a} subset of insurance policies up for renewal in November and December weren’t despatched correct notices of renewal. The service proposed to now ship the notices, then rapidly cancel the insurance policies, with 60 days’ discover. But OIR stated that the plan would create confusion and shopper hurt. It ordered UPC to increase protection for these insurance policies for 120 days, then non-renew them.

“That’s good. Maybe by then, the market will be in better shape and policies can be placed more easily with other carriers,” Ulrich stated.

Officials with United and its publicly traded holding firm have often not responded to interview requests about its monetary state of affairs.

The OIR order notes that UPC should keep workers to reply to policyholders, should submit its customer support script to OIR for approval, and its brokers should help in inserting insurance policies with different carriers. All unearned premiums ought to be returned to policyholders by June 1, 2023.

The consent order additionally sheds new mild on the financial troubles and restructuring efforts that United has been by way of within the final 18 months:

• UPC noticed a giant decline in underwriting outcomes, with losses exceeding $35 million in every of the final 5 years. It reported a web underwriting lack of nearly $170 million within the third quarter of 2022. The surplus as of Q3 was $57 million, an enormous drop from the 2021 reported policyholder surplus of $169 million, the order notes.
• The firm introduced late final 12 months that it might cease writing new house owner insurance policies in Florida. It took different steps to regain its footing, together with consolidating 4 sister corporations into two. Despite these strikes, underwriting losses continued.
• In July, the Demotech monetary ranking agency downgraded UPC considerably. Without a good ranking, UPC policyholders with mortgages may have been compelled to search out new HO insurance coverage or be force-placed into costlier insurance policies. To get round that, Florida officers stated in July that they’d discovered an exception to the Fannie Mae and Freddie Mac secondary mortgage lender guidelines: If an insurer can present that each one claims will probably be paid in case of insolvency, a monetary ranking shouldn’t be required. The state-created Citizens Property Insurance Corp. would function the backstop, using a kind of reinsurance association generally known as a cut-through endorsement.
• UPC was one of many few carriers to enroll for that Temporary Market Stabilization Arrangement. But the association is simply short-term, OIR stated.

“United has been unable to secure reinsurance commitments for the 2023 hurricane season,” the consent order explains. “The company has no rating acceptable to the secondary mortgage market, and the Temporary Market Stabilization Arrangement terminates on May 31, 2023.”

The firm now plans to scale back the charges paid to its managing common company, one thing the OIR permitted, with the stipulation that the funds be made weekly. UPC additionally plans to change how its reinsurance tower is allotted between it and its sister firm, American Coastal Insurance Co.

United stated in its preliminary plan that the runoff would doubtless final past the top of 2024.

“The plan indicates that the company intends to manage and fund its losses and loss adjustment expenses in 2024 and subsequent years through reinsurance recoveries, capital from the parent or other sources which the company projects will provide sufficient liquidity to manage the runoff,” the plan famous.

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