FedNat agreed to a consent order filed by the Florida Department of Insurance on May 13, 2022 to cancel 56,500 of its 140,000 in-force Florida policy count as of May 12th, Monarch National must cancel 8,400 of its personal property policies and all of the approximately 3,300 Maison Insurance policies effective 45 days post-order are being cancelled as well. The Department determined that the early cancellation of the policies was in the best interest of the policyholders and gives some relief to the Florida Insurance Guaranty Association (FIGA) that has been deluged with claims from three2022 insolvencies and those from 2021.
The strategic plan filed with the Department includes additional capital for Monarch National who will be assuming the remaining 83,000 FedNat policies. FedNat has indicated to the Department that it has adequate resources to runoff the liabilities of the companies, and wind down operations.
The Department is reviewing the acquisition plan filed on May 9th that includes Monarch entering into an agreement with an investor that stipulates that the cancellations must take place in order for the acquisition to be successful.
Under Florida law early cancellation of insurance policies is permitted with 45 days notice when an insurer is in hazardous condition, and the Department determines that the early cancellation is in the best interest of the company's policyholders. Had FedNat, Maison and Monarch not been able to cancel the policies, they would not have been able to secure adequate reinsurance for the upcoming hurricane season nor would they be able to maintain adequate levels of surplus.
Unearned premium claims for all three companies will be processed and paid pro-rata to the affected policyholders by the companies, and all refund checks will be mailed out by July 1, 2022.
In addition, FedNat and Monarch are to maintain adequate staffing to handle all policyholder inquiries, and must continue to file financial statements with the department. FedNat has voluntarily ceased writing new business in the state, and should they desire to write new business they will be required to file a revised business plan. The order also stipulates that no policies from the canceled block may be rewritten on FedNat policy forms or by an affiliated insurer for three years from the cancellation date.
While the Consent Order avoids liquidation of the three companies, another significant block of Florida homeowners and condominium owners will be out searching for new coverage in a shrinking market for coverage in the state. Property owners, insurers and reinsurers alike are hoping that the special Legislative Session to be held at the end of May brings some meaningful changes to the beleaguered Florida property insurance market.