State orders Florida Specialty Insurance Co. to liquidate

State regulators ordered Sarasota-based homeowners insurance company Florida Specialty Insurance Co. to liquidate last week after it failed to keep the required amount of assets and continued to write policies after executives knew the company was insolvent.

“(The Florida Office of Insurance Regulation) has been working with Florida Specialty for over a year in an attempt to help the company develop a viable business plan,” insurance commissioner David Altmaier said in a statement.

Florida Specialty offered property insurance for homeowners and renters, as well as manufactured homes. It accounted for roughly 2 percent of Florida’s homeowners insurance market with about 90,000 policies in the state, according to the Florida Office of Insurance Regulation.

The company could not be reached for comment.

According to Leon County court records, the company’s financials caused it to run afoul of state law. Insurance companies are required in Florida to maintain a $10 million surplus. According to the liquidation documents, Florida Specialty filed a financial statement that said it had just over the required amount in surplus.

But an incorrectly filed deferred tax assessment, the court document said, knocked that amount down to $8.56 million. Nearly all of its remaining surplus was through an insurance policy with a Pittsburgh insurer that said it already paid Florida Specialty. That brought Florida Specialty’s surplus to just $21,093, far below the required amount.

It was also insolvent. According to court documents, Florida Specialty had roughly $45 million in liabilities, exceeding its $44 million in assets. The company also “consistently” underestimated its losses, and didn’t “establish adequate reserves for its losses" over several years. It hadn’t posted a profit through the year’s second quarter.

That didn’t stop the company’s officers and directors, the filing said, from accepting and renewing policies after mid-August, “when they knew or should have known that (Florida Specialty) was impaired or insolvent.”

Florida Specialty, regulators found, “willfully violated” its charter that allows it to operate in the state.

The insurer is one of four within the last five years that the state ordered to liquidate, according to the Florida Department of Financial Services. Others include Sawgrass Mutual Insurance company, National Insurance Company and Sunshine State Insurance Company.

With several weeks left in hurricane season, customers will need to find new coverage. Policyholders received letters last week informing them that their coverage would be terminated as of the beginning of November.

According to the Florida Office of Insurance Regulation, customers’ policies will be backed by Florida Insurance Guaranty Association until Nov. 1. After that, policyholders must find coverage through either the private insurance market or with Citizens Property Insurance Co.

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“Florida is in the middle of the 2019 hurricane season, already having dodged one Category 5 storm," said Katie Strickland, spokeswoman for the Florida Department of Financial Services. “The last thing consumers need is to be left without coverage.”

The Florida Department of Financial Services is overseeing the liquidation.

While it covers residents around the state, a majority of Florida Specialty’s policyholders were concentrated in Orange, Polk, Lee, Seminole and Osceola counties.