United Property & Casualty Insurance Co., facing heavy losses, in July floated feelers about a possible sale or merger with another carrier, following a ratings cut and a significant restructuring plan.
But the firm’s holding company announced Wednesday that it is now pulling out of the market entirely in several states.
UPC has filed recall plans in Florida, Louisiana and Texas and will soon file a recall plan in New York. The company, which until this year carried 180,000 policies in Florida, will not renew personal lines in those states and has set itself up for a regular runoff, UPC said in a news release.
“Due to the significant uncertainty surrounding the future availability of reinsurance for our personal lines business, I believe that placing United P&C in an orderly runoff is prudent and necessary to protect the company and its policyholders,” said UPC Chairman and CEO Dan Peed. statement. “The company is actively pursuing opportunities to leverage our people, technology and other capabilities.”
UPC was founded in 1999 and is headquartered in St. Petersburg, Florida. Late last year, the company suspended the new home owner business in Florida. This year, parent company United Insurance Holdings went through a major restructuring, consolidating four subsidiaries into two.
The moves came after big signing losses in 2021 and earlier this year. In July, financial rating firm Demotech downgraded UPC’s financial strength. Around that time, UPC said it was exploring a number of options, including a possible sale or merger with another insurer.
This apparently did not happen. UPC did not address a sale in its Wednesday news release, and an investor relations official could not be reached Thursday.
The company said renewal rights for its policies in Georgia, South Carolina and North Carolina have been sold and all premiums and losses have been waived.
Regular balloting may not be so regular, and UPC’s announcement raises questions about Florida’s latest plan to protect homeowners covered by unrated or discounted carriers, said Mark Friedlander, director of communications for the Institute of Insurance Information.
“It clicked with me that this is not going to work,” he said Thursday.
After Demotech in July told more than a dozen insurers they would soon see a downgrade or withdrawal, it set off alarm bells for Florida’s insurers, brokers and regulators: Fannie Mae and Freddie Mac, the quasi-government corporations that buy mortgages from primary. Lenders will not support loans if the home owners insurer is not rated.
To avoid that, Florida officials said last month they had found an exception to the rules: If an insurer can show that all claims will be paid in bankruptcy, a financial appraisal is not required.
Citizens Property Insurance Corp., created by the state, would serve as the backstop, using a type of reinsurance arrangement known as a staggered endorsement, Florida regulators announced. The Florida Insurance Guaranty Association would pay a bankrupt insurer’s claims up to a statutory limit of $500,000, and citizens would step in after that, for at least a year, under the plan.
But Friedlander said Thursday that sources with Fannie Mae have told him that, a month after announcing the plan, the mortgage-buying company is still analyzing the proposal.
“It sounds to me like they’re not going to accept the Citizens Back-stop plan,” he said.
Fannie and Freddie officials did not return calls and emails from Insurance Journal about the matter.
Without the Citizens plan and without a viable Demotech evaluation, UPC policyholders and insurance agents in Florida may now find themselves in an emergency situation. A regular runoff usually means that the policies will be discontinued for a period of one year. But without a financial assessment for UPC, Fannie and Freddie can now insist that homeowners with UPC policies find new coverage much sooner or be forced to settle, Friedlander said.
Floridians with UPC policies should start looking for a new carrier immediately, he said.
The situation could also mean UPC won’t be able to stay afloat much longer, unable to pay claims and forced into bankruptcy and receivership within days, Friedlander predicted.
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