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Tower hill insurance cancellation9/20/2023 The 19,600 policies Southern Fidelity is seeking to nonrenew are generating significant losses, and OIR found after evaluation that dropping the policies is “necessary to protect the best interest of its policyholders and the public.” OIR said it previously approved a rate increase, a merger with its sister company Capitol Preferred Insurance Co., the cancellation of an identified block of policies, and a capital contribution plan developed by Southern Fidelity’s new indirect owners, HSCM Bermuda. Southern Fidelity’s order, signed April 28, is the latest in a series of moves by OIR designed to “remediate the financial condition” of the company and to facilitate a long-term financial restructuring plan. No policies from the block of cancelled policies can be rewritten on a different UICNA policy form or an affiliated insurer for a period of three years from the date of cancellation. The plan must include the company’s ability to generate “successful operation results by the implementation of underwriting changes, rate adjustments, operational savings, capital management, and other significant modifications to its current business model.” UICNA must also continue to file monthly financial statements with OIR until further notice and submit an updated business plan to the regulator by Aug. UICNA must file its plan of merger with OIR and the Texas Department of Insurance no later than May 14, 2021, and must provide at least 45 days’ notice of cancellation to the affected policyholders. is unsuccessful in becoming licensed in Florida, “UICNA agrees it will consent to immediate administrative supervision, for the purpose of conserving assets while UICNA develops a fully funded plan,” the OIR order states. If the merger plan is not approved, or if Universal North America Insurance Co. The policy cancellations are also a condition of the company’s merger plan, OIR said, which is still subject to approval by the Texas regulator. Given UICNA’s catastrophe loss experience, higher reinsurance costs, and significantly increased litigation, the identified policies for cancellation would “provide an immediate impact to the company’s financial position and facilitate the completion of a financial restructuring plan to protect its policyholders and the public,” the order says. OIR said UICNA provided financial projections that show without the cancellation of the approximately 9,341 homeowners policies and 3,953 dwelling policies, the company’s financial condition would further deteriorate to an unsustainable level by the end of 2021. UICNA’s surplus deterioration came despite the company receiving capital contributions of $13.5 million, without which it would have been considered an impaired insurer as it would have fallen below Florida’s minimum required surplus of $10 million. 31, 2020, OIR stated in the order approving the policy cancellations. UICNA reported net losses of $4.1 million in 2019 and $22.5 million in 2020, and had decreased its surplus by more than $9 million as of Dec. UICNA’s cancellation of 13,294 of its 57,000 Florida policies will occur as part of a financial restructuring plan that includes a merger with and into Universal North America Insurance Co., a Texas domestic company. The respective orders outline what “hazardous” financial conditions led to the approval of the policy cancellations and nonrenewals: Universal Insurance Co. “Allowing for the early cancellation or nonrenewal of policies is not a decision made lightly, and requires a finding that such action is necessary to protect the best interests of the public or policyholders.” “OIR remains focused on the protection of consumers and fostering stability in Florida’s insurance marketplace,” OIR said in a statement to Insurance Journal. Florida insurers were reported to have lost a combined $1.7 billion in 2020. The regulator’s actions are the most recent indicators of Florida’s stressed insurance marketplace that has been described as “ spiraling towards collapse.” Altmaier and others have previously warned of problems for Florida’s domestic companies thanks to spiking litigation, dishonest contracting practices, catastrophe events and high reinsurance costs. The early cancellation and nonrenewals of policies is “an extraordinary statutory remedy reserved to address insurers which are or may be in hazardous financial condition,” the Florida Office of Insurance Regulation stated in the orders, which also require the insurers to take other steps to stay solvent. was approved to nonrenew approximately 19,600 personal residential policies over the next 14 months, with approximately 2,300 receiving less than the required statutory written notice of nonrenewal.
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