SARASOTA — The Florida Office of Insurance Regulation has placed a Sarasota-based property insurer under its supervision to “wind down” the company. Gulfstream Property and Casualty Insurance Co., the regulator said, failed to keep the minimum amount of funds on hand to pay policyholder claims.
While under “administrative supervision,” Gulfstream is not writing new policies and will make policy information immediately available to other carriers that could take on its policyholders. The process is typically confidential, but the Office of Insurance Regulation determined it was “in the best interest of the public” to forego that confidentiality, according to a Friday filing.
The regulator’s “priority remains the protection of consumers and will make every effort to ensure consumers have access to coverage,” spokesperson Alexis Bakofsky said in an emailed statement.
The move comes amid a backdrop of deep financial issues within the Florida property insurance market. Last year, Florida’s property insurers reported a combined $1.57 billion in underwriting losses, bringing in less in premiums than they spent on claims and expenses. Citizens Property Insurance Co., the state-run insurer of last resort, has grown rapidly as it absorbs policies from other carriers. And legislation aimed at curbing some of the industry’s issues, such as an increased number of roofing claims not related to storms, likely won’t provide short-term solutions.
The Office of Insurance Regulation decision came after Demotech Inc., which rates property insurers, withdrew its favorable assessment of Gulfstream’s financial health. It was previously rated as an “A,” which is considered “exceptional.” It was one of nine companies the ratings agency said in March needed to improve its finances to maintain its financial rating.
According to Joseph Petrelli, president of Demotech, Gulfstream was courting an investor to help bolster its finances, but negotiations fell through late last week.
“They had a substantial partner who could have been an investor,” he said, “but it just didn’t pan out at the last minute.”
Gulfstream’s supervision will last at least 90 days. During this period, the company is effectively at a standstill. It cannot do new business, terminate customers’ coverage (unless they do not pay their premiums) or liquidate its assets. It cannot spend more than $10,000 without approval from the regulator. And if another insurer agrees to purchase its policies, the Gulfstream subsidiary that handles administrative work is not allowed to charge its usual fee.
Gulfstream must also submit a plan by Wednesday that will correct its financial deficit.
Last month, Gulfstream was one of three property insurers that were approved to drop a combined 53,200 policies over the coming months. Gulfstream had the bulk of those policies — 20,311, or about 36 percent of its total policies in Florida. Its affected customers had 45 days notice to find another carrier.
Universal Insurance Co. of North America was approved to cancel 13,294 policies on the same timeline, while Southern Fidelity Insurance Co. will allow 19,600 policies to expire over the next year.
The funds Gulfstream has on hand to pay claims, known as “surplus,” dropped by 20 percent from 2019 to 2020 to $20 million. According to the Florida Office of Insurance Regulation, Gulfstream raised $17.1 million last year to ensure it met the state’s minimum surplus requirement. According to the Office of Insurance Regulation, Gulfstream dipped below the minimum amount again June 21.
Gulfstream also reported a $35 million underwriting loss last year.
This isn’t the first time Demotech has withdrawn a company’s rating this year. In March, Demotech pulled its “A” rating of St. Petersburg-based American Capital Assurance Corp. at the company’s request because of losses from severe storms last year. AM Best, another ratings agency, downgraded the company from an “A-” rating to a “C.”
The following month, the Florida Office of Insurance Regulation asked the state to take over American Capital because it was insolvent.
Demotech’s Petrelli said that he does not expect other companies to face the same fate.
“Everyone has found their suitor, their investor,” he said. Gulfstream and its sister company “were the last companies that were still looking for that suitor.”