Property insurer to exit Florida market

United Property & Casualty Insurance Co. will exit Florida’s troubled homeowners’ insurance market, forcing customers to find new coverage as their policies come up for renewal, the insurer’s parent company announced Thursday.

TALLAHASSEE, Fla. – United Property & Casualty Insurance Co. will exit Florida’s troubled homeowners’ insurance market, forcing customers to find new coverage as their policies come up for renewal, the insurer’s parent company announced Thursday.

The St. Petersburg-based United Insurance Holdings Corp. said it has filed plans to withdraw from what are known as personal-lines markets in Florida, Texas and Louisiana. It also will file a withdrawal plan in New York.

A news release from the parent company said the plans would “effectively place United P&C into an orderly run-off,” which means policies will be gradually dropped as they come up for renewal. The announcement pointed, in part, to problems in obtaining reinsurance, which is critical backup coverage to help handle such things as hurricane claims.

“Due to significant uncertainty around the future availability of reinsurance for our personal lines business, I believe placing United P&C into an orderly run-off is prudent and necessary to protect the company and its policyholders,” United Insurance Holdings Chairman and CEO Dan Peed said in a prepared statement. “The company is actively pursuing opportunities to leverage our people, technology, and other capabilities. Our commercial business continues to perform well and provides the company a stable platform to build new engines of growth and profitability.”

The parent company said in July that it had started a “review of its strategic and capital raising alternatives” amid financial losses. The Demotech financial-rating agency later downgraded United Property & Casualty from an “A Exceptional” rating to a “M Moderate” rating.

The news release Thursday said Demotech has notified United Property & Casualty that it will withdraw the insurer’s rating. Rating withdrawals have been precursors to some insurers being declared insolvent and placed into receivership.

Thursday’s announcement did not say how many customers in Florida and the other states would be affected. But a United Insurance Holdings investor presentation in May cited about 185,000 Florida policies as of March 31.

United Property & Casualty is the latest insurer to leave the Florida market or dramatically scale back coverage amid losses. As indications of the troubles, five property insurers have been deemed insolvent since February, and the state-backed Citizens Property Insurance Corp. has ballooned to more than 1 million policies as many homeowners have few other coverage alternatives.

During a state Cabinet meeting Tuesday, Insurance Commissioner David Altmaier acknowledged Florida is dealing with a “very challenging market.” But he said the state has taken a “significant number of positive steps in addressing this crisis” with legislation passed in recent years and during a May special session.

“As we have said numerous times before, there is no overnight fix to this insurance crisis. It’s been years in the making, unfortunately,” Altmaier told Cabinet members and Gov. Ron DeSantis. “But the steps we have taken so far under your leadership are going to be significant steps forward into addressing this issue.”

The new rules put in place during the special session aren’t making a difference yet.

“It’s been explained to me by many sources that we probably won’t see the benefit of this legislation until 2024, maybe 2023,” said Jacksonville insurance agent Matt Carlucci Jr. “But, unfortunately, it was too little, it was way, way, way too late.”

Carlucci said agents are trying to get customers into a new policy as soon as they can, but he counted eight or more companies that have dropped coverage in the past six or seven months.

“Even if you take rate increases as high as 100-200%, it still has not been enough to keep many of these companies in business,” he said. “And that’s why we’re in the spot that we’re in.”

In addition to difficulties obtaining reinsurance, property insurers have blamed large numbers of lawsuits in Florida for financial problems. Florida, Louisiana and Texas also are prone to getting battered by costly hurricanes.

“Extreme weather, coupled with runaway litigation, is the reason for this announcement,” insurance lobbyist and former regulator Lisa Miller said Thursday of the United Property & Casualty decision.

Insurance companies depend on some complicated math to make sure they can cover costs when disaster strikes — disasters like the ones Floridians see during hurricane season. That’s just one part of the problem for companies that can’t afford to stay in business.

“It’s gotten to a point where basically insurance companies really can’t deny these roof claims because they’ll get sued,” Carlucci said. “And it costs them more money to defend than it does to actually pay for a new roof.“

The math for roof claims over the years hasn’t been accurate. Carlucci said an explosion in costs led to explosive rate increases and ultimately the death of companies.

“So it’s basically like the equivalent in the health insurance industry of everybody turning into cancer claim tomorrow,” Carlucci said. “The industry just wouldn’t be able to handle that.”

After the initial Demotech downgrade of United Property & Casualty, the state Office of Insurance Regulation on Aug. 2 put the company into a new stopgap program aimed at making sure coverage would continue for homeowners.

The program involves Citizens Property Insurance acting as a financial backstop for private insurers that get downgraded. Citizens took on a reinsurance role to help make sure claims get paid if insurers go insolvent.

Financial ratings are important, in part, because mortgage-industry giants Fannie Mae and Freddie Mac require homes to be insured by financially sound companies. For insurers rated by Demotech, Fannie Mae and Freddie Mac require “A” ratings or better.

The Demotech downgrade of United Property & Casualty put the insurer below an A rating. The state’s stopgap program is designed to satisfy Fannie Mae and Freddie Mac in such situations. It uses an exception in Fannie Mae and Freddie Mac standards that applies when reinsurers take responsibility for paying claims if insurers go belly up.

About the Authors:

Jim has been executive editor of the News Service since 2013 and has covered state government and politics in Florida since 1998.

Kent Justice co-anchors News4Jax's 5 p.m., 10 and 11 p.m. newscasts weeknights and reports on government and politics. He also hosts "This Week in Jacksonville," Channel 4's hot topics and politics public affairs show each Sunday morning at 9 a.m.