Florida OIR wants longer notice on UPC runoff policy cancellations

United Property & Casualty Insurance Co., currently in the midst of an orderly run-off after years of heavy losses, had planned to give 60 days notice of cancellation to policies still in force as of May 31, 2023. But regulators of Florida now require 120 days notice.

“It’s good to see policyholders getting 120 days’ notice and it’s good for agents to have more time on this,” said Kyle Ulrich, president of the Florida Association of Insurance Agents.

Florida Insurance Commissioner David Altmaier signed a consent order this week, revising UPC’s liquidation plan and tightening oversight of the troubled company. The UPC announced in August that it was withdrawing from several states, including its home state of Florida, and would not renew most of its policies.

Florida Bureau of Insurance Regulations consent order noted that as of Nov. 1, UPC had approximately 142,785 policies in force in Florida and would still have 70,287 in force on May 31. The carrier’s liquidation plan, submitted in mid-November, said it would give two months’ notice to those remaining policyholders.

But two months’ notice, although more than required by law, is not enough, Altmaier’s office said.

“As a condition of approving early cancellation of its Florida policies that have not been non-renewed 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” in the company’s proposed plan, the order reads.

UPC must also submit its Notices of Cancellation, Notices to Policyholders and Notices to Agents to the RIO for approval.

United also reported in its initial plan that a subset of policies due for renewal in November and December had not received the appropriate renewal notices. The carrier offered to send the notices now, then quickly cancel the policies, with 60 days notice. But OIR said the plan would create confusion and hurt consumers. He ordered UPC to extend coverage on those policies for 120 days and then not 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 said.

Officials of United and its publicly traded holding company generally did not respond to interview requests about its financial condition.

The OIR order notes that UPC must maintain staff to service policyholders, must submit its customer service script to the OIR for approval, and its agents must assist in placing policies with other carriers. All unearned premiums must be returned to policyholders by June 1, 2023.

The consent order also sheds new light on the financial difficulties and restructuring efforts United have been through in the last 18 months:

• UPC has seen a sharp decline in underwriting results, with losses exceeding $35 million in each of the past five years. It reported a net underwriting loss of nearly $170 million in the third quarter of 2022. The surplus in the third quarter was $57 million, a huge drop from the policyholder surplus reported in 2021. of $169 million, the order notes.
• The company announced late last year that it would stop writing new home insurance policies in Florida. He took other steps to regain his footing, including consolidating four sister companies into two. Despite these moves, underwriting losses continued.
• In July, the financial rating company Demotech significantly downgraded UPC. Without a favorable rating, UPC policyholders with mortgages could have been forced to find new HO insurance or be forced into more expensive policies. To circumvent this, Florida officials said in July they had found an exception to Fannie Mae and Freddie Mac’s secondary mortgage lender rules: if an insurer can prove that all claims will be paid in the event of insolvency, a financial rating is not required. . The state-created Citizens Property Insurance Corp. would act as a backstop, using a type of reinsurance agreement known as a transition endorsement.
• UPC was one of the few carriers to sign this temporary market stabilization agreement. But the arrangement is only temporary, the OIR said.

“United has been unable to obtain reinsurance commitments for the 2023 hurricane season,” the consent order explains. “The company does not have an acceptable secondary mortgage market rating, and the temporary market stabilization arrangement expires May 31, 2023.”

The company is now considering reducing the fees paid to its managing general agency, which the OIR approved, stipulating that payments should be made weekly. UPC also plans to change the split of its reinsurance tower between itself and its sister company, American Coastal Insurance Co.

United said in their original plan that the second round would likely last beyond the end of 2024.

“The plan indicates that the company intends to manage and fund its losses and loss adjustment costs in 2024 and beyond through reinsurance recoveries, parent company capital or other sources that , according to the company, will provide enough cash to handle the run-off,” the plan noted.

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