Florida insurance regulators moved last week to begin the takeover of a financially troubled group of insurance companies.

The state's Department of Financial Services filed papers in Leon County Circuit Court last week to put the Southern Family Insurance Co. under state management, an action approved by Judge Leon Silverman.

The company is one of three units in the Tampa-based Poe Financial Group that also includes the Atlantic Preferred Insurance Co. and Florida Preferred Insurance Company.

Atlantic Preferred faces imminent takeover while Florida Preferred will most likely face such action on June 1 if it is not able to obtain reinsurance.

The action comes with the onset of the 2006 hurricane season less than a month away, and threatens to put hundreds of thousands of policyholders into the state's residual market insurer, Citizens Property Insurance Corp., which ran a deficit last year in the aftermath of the record insured losses.

Together the three companies cover an estimated 280,000 policyholders.

Last week Insurance Commissioner Kevin McCarty informed Chief Financial Officer Tom Gallagher of the necessity of the action.

When a company is in liquidation, the department continues to serve as receiver, but the Florida Insurance Guaranty Association is activated to help pay outstanding claims.

Mr. Gallagher is urging policyholders to work with their insurance agents to obtain property coverage from private insurers rather than with Citizens.

But if they are unable to obtain it Mr. Gallagher said Citizens will continue coverage at the same rate until renewal time.

In its closing week, the Florida Legislature is debating a measure that could channel nearly $1 million of Florida sales tax revenues to pay for the Citizens deficit so as not to burden state policyholders.

The lawmakers are also debating a measure that would lower the threshold for small insurers to get coverage from the Florida Catastrophe Fund.

Special Reports /

Florida Insurers Face Liquidation

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