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Three Florida property insurers will drop a total of 50,000 policies

Those affected should contact their insurance agent to find new coverage.
The Florida Office of Insurance Regulation is allowing three Florida insurers to drop about 50,000 policies to maintain financial stability. Pictured is insurance commissioner David Altmaier. | [Courtesy of the Florida Office of Insurance Regulation]
The Florida Office of Insurance Regulation is allowing three Florida insurers to drop about 50,000 policies to maintain financial stability. Pictured is insurance commissioner David Altmaier. | [Courtesy of the Florida Office of Insurance Regulation] [ Florida Office of Insurance Regulation ]
Published May 20
Updated May 20

More than 50,000 Florida policy holders will need to find a new property insurance carrier in the coming months, just as hurricane season roars into gear.

Three Florida insurers have received approval to let some of their policies expire and to cancel others, a step the state’s insurance regulator called “extraordinary.”

The approvals are the latest bid to bring financial stability to Florida’s property insurance market. Florida carriers posted their worst financial performance in decades last year, with a combined $1.57 billion in underwriting losses and no quick fix on the horizon.

Now, just just two weeks ahead of the start of hurricane season, further upheaval is expected.

Related: Florida’s property insurance market is ailing. There is no quick fix.

The Florida Office of Insurance Regulation approved Gulfstream Property and Casualty Insurance Co., Southern Fidelity Insurance Co. and Universal Insurance Co. of North America to offload 53,200 policies. Most of it will take place over the next few weeks.

“The early cancellation of policies,” the regulator said in a filing, “is an extraordinary statutory remedy reserved to address insurers which are or may be in hazardous financial condition without the cancellation of some or all of its policies.”

The biggest and most abrupt portion of these comes from Gulfstream and Universal. Sarasota-based Gulfstream is canceling 20,311 policies — about a third of its total in Florida — giving those affected 45 days notice to find another insurer. Universal will cancel 13,294 policies, about a quarter of its Florida customers.

Both insurers struggled to maintain the minimum amount of funds the state requires to pay claims, known as “surplus.” Gulfstream’s surplus dropped by 20 percent from 2019 to 2020, and it reported a $35 million underwriting loss last year, spending more on claims and expenses than it brought in through premiums. Universal’s surplus dove by about 40 percent to $22.3 million from 2019 to 2020. Each raised investments — $17 million for Gulfstream and $13.5 million for Universal — to help with last year’s balance sheet. Universal is in the process of merging with a Texas insurer.

Southern Fidelity opted for a different route. It will allow 19,600 policies to expire over the next year. Instead of having to immediately find new coverage, those policyholders will need to seek a new carrier once their coverage with Southern Fidelity expires.

Southern Fidelity has been working with regulators since at least last year to regain its financial footing. It merged with sister company Capitol Preferred Insurance Co. in August 2020 after the two posted a collective $40 million in losses as of June 2020.

Related: Florida insurers Southern Fidelity and Capitol Preferred merge

Where the dropped policies will go is still up in the air. The most likely candidate to absorb them is Citizens Property Insurance Co., the state-run property insurer of last resort. According to spokesman Michael Peltier, it’s still too early to know how many of the policies will be purchased by other insurers first.

Citizens is currently growing by 4,500 policies per week and has 602,000 policies, Peltier said. It has absorbed policies from several insurers that were unable to maintain them.

“We’re confident that we’re in a position to handle any and all policies that come our way,” he said.

Customers whose policies are being canceled or allowed to expire should contact their insurance agent to find a new carrier.

More financial instability is likely ahead for Florida’s insurers. Coinciding with the beginning of hurricane season is the renewal period for reinsurance, extra coverage insurers purchase to ensure they can pay claims. Reinsurance costs make up a significant portion of what policyholders pay through rates, and depending on how reinsurance is priced this year, ratepayers could see more increases.