In 2019, the Florida Office of Insurance Regulation ordered the Florida Specialty Insurance Company (FSIC) into liquidation. The company’s principal business was servicing non-admitted insurance, commercial property line, and auto insurance lines. Following the liquidation, FISC entered into an agreement with KPMG LLP to serve as its receiver and provide professional financial management services and representation on all matters related to a potential sale or transfer of its assets.
The order also authorized an increase in the existing rehabilitation assessment on all non-admitted insurers to offset the cost of the liquidation and established a procedure for refunding assessments paid by policyholders after a four-year period if unneeded. The liquidation of Florida Specialty Insurance continued a long-standing trend of insurers leaving the state of Florida, especially those companies offering homeowners coverage.
A Brief Review of Florida Specialty Insurance Co
Florida Specialty Insurance Company was a surplus lines insurer headquartered in Jacksonville, Florida. As of June 30, 2018, it had approximately $13.7 million in assets and $311.6 million in liabilities. The company was placed into receivership due to its financial situation and forced to liquidate its business operations. With diluted assets and a weak balance sheet, the company could not process claims, as there simply was not enough cash on hand.
Before going out of business, FSIC Insurance had been active in acquiring other companies, including buying out Liberty National Life Insurance Company in early 2017. That purchase alone, for example, was for considerable sums, which included purchasing all outstanding shares at $8 per share. In addition, at that time, FISC had also acquired a substantial amount of shares from existing Liberty National Life Insurance Company shareholders.
Why The Florida Office of Insurance Regulation Ordered the Liquidation
The Regulator placed the company into liquidation after it failed to pay claims from its assets. FSIC had been operating in the state since 2000 but went under due to financial difficulties and a lack of operating funds.
At the time of liquidation, the company had $13.7 million worth of assets and liabilities, totaling $311 million. However, there were hopes that these numbers would change once all involved parties were paid back from FSIC’s assets and liabilities. In addition, any other monies owed by FSIC’s former owners or partners, such as reinsurers who had insured their policies with FSIC back when they were still active members within this particular industry, would go into paying off debts.
The order also authorized an increase in the existing rehabilitation assessment on all non-admitted insurers to offset the cost of the liquidation and established a procedure for refunding assessments paid by policyholders after a four-year period if unneeded.
New Insurance Regulations Have Been Imposed in Florida
The new cap would be set at $35 million per year, less than half of what it was before this legislation was passed. This bill also increased the minimum cash reserve requirements for non-admitted insurers operating in the state of Florida.
The new law also placed strict limits on the amount of money collected by the state in a given year. The first $35 million would go toward paying off costs associated with liquidation, while any excess would be refunded to policyholders after four years.
Florida Specialty Insurance Company was put into receivership so claims against it could be paid from its assets. This happens when a court-appointed receiver takes over a company’s assets when there is insufficient money in the bank to pay all debts and liabilities. In this case, all policies will be paid out according to their terms until further notice.
The Insurer Cannot Write New Policies or Renew Existing Ones
The purpose of a receivership is to protect the interests of policyholders. The receiver will administer any submitted claims while the company remains in receivership. The receiver will also work with outside parties to settle any outstanding claims.
As the name implies, Florida Specialty Insurance is a specialty insurer that offers property and casualty insurance products. It has been in business since 1974 and has more than 1,500 policyholders across Florida. Although once a thriving insurer across Florida, the company was mismanaged and carried a heavy debt load. Please contact your agent or broker if you have a policy with Florida Specialty Insurance Company and have any questions. To get a free home or auto quote online, enter your zip code and fill out an application. You will receive rate quotes from multiple providers and could save hundreds.
What The Liquidation Means to The Policyholders
With FISC going down and out of business, the question in most people’s heads, especially policyholders, is what happens next? The good news is policyholders will be able to recover at least some of their money. Here’s how it works:
Unearned Premium Refunds
Following the liquidation of FSIC, the Florida Insurance Guaranty Association (FIGA) was activated to help refund policyholders. The people that selected an alternative home insurance company coverage using a quick coverage quote process will have to receive their unearned Premiums back. However, there will be a $100 statutory deduction. The policyholders whose unearned gross refunds are less than $100 will not initially receive a refund but will be eligible for one once the receiver determines there are enough funds to process the payout.
Mortgage Company Refunds
The premiums paid directly from mortgage companies will not be returned to the mortgage companies. Instead, monies will be paid directly to policyholders. For the people that have recently changed names or mailing addresses, you must notify the receiver in writing to receive your mortgage refunds.
Conclusion
The Florida Office of Insurance Regulation has ordered the liquidation of Florida Specialty Insurance Company. The company has been placed into receivership, and all policies will be paid according to their terms until further notice.
In addition, its assets have been transferred to a liquidator who will oversee the process of paying claims. The company has been placed into receivership, meaning its assets will be used to pay its debts. The company’s policyholders should contact their insurance agent or company representative for more information about their policy or any questions or concerns.