People’s Trust, Southern Fidelity Stop Writing New Business in Florida

Original article can be found HERE.

Two more property insurers, including two of Florida’s larger carriers, did not wait around to see what help the just-concluded special session of the Legislature may provide, and have stopped new business in the state.

People’s Trust, once listed as the ninth-largest property-casualty carrier in the state and whose chief operating officer is former Florida Insurance Commissioner Tom Gallagher, on May 19 made a filing with the Florida Office of Insurance Regulation. It said the company would suspend writing new homeowner and dwelling-fire policies that day.

Southern Fidelity Insurance Co., headquartered in Tallahassee, told agents Thursday that it had suspended new and renewal business for all lines until it can complete its reinsurance coverage for the 2022 hurricane season. Existing quotes cannot be bound, the memo said.

“We deeply apologize to our agency partners for the impact this will take on your business and appreciate your commitment to us,” reads the Southern Fidelity announcement. The company also writes in South Carolina, Louisiana and Mississippi.

Company offices will be closed starting today, Friday, at 2 p.m., the company said.

The People’s Trust filings, which were quickly approved by OIR, tweak wording in the company’s manuals for homeowners multi-peril and for dwelling fire coverage. Ineligible risks now include “new business located in all Florida counties.”

The companies did not indicate how long the suspensions would be in effect. People’s Trust did not fully explain the reason for the suspensions, but Gallagher provided a brief statement Friday morning:

“We have completed our reinsurance purchase and are working on our new rate filing to account for additional reinsurance costs so that we can open up to new business,” he said. “We are currently renewing business that meets our underwriting criteria. We will be applying for the newly legislated roof deductible to be placed on our policies as soon as it’s approved.”

It’s likely the carriers will be able to tap into a special reinsurance program established this week by the Florida Legislature at its special insurance session, but it’s unclear if the program will provide enough savings to help Southern Fidelity secure other layers of reinsurance.

The filings did not indicate how many People’s Trust policies will be affected. People’s Trust does not report the quarterly information to OIR. Southern Fidelity does, and reported 98,641 policies in force at the end of 2021, and $184 million in total premium written. Southern Fidelity was provided significant financial support in late 2020 when Hudson Structured Capital Management took a majority ownership stake.

The carriers are now the seventh and eighth insurers to announce they have stopped writing in Florida’s distressed market in the last seven months. Others include United P&C Insurance, Avatar Insurance (now insolvent), Florida Farm Bureau and TypTap. Progressive Insurance also said late last year it will not renew homes with roofs over 16 years of age. Other carriers have made similar filings.

The suspension comes as a surprise to some, not to others in the Florida insurance market. Some have warned that more carriers will soon become insolvent, despite the action from lawmakers at the special session this week. Gallagher said the new laws should help but more work remains to be done.

“The special legislative session was very helpful to both insureds and carriers. As was stated in both the house and senate, Florida accounts for 79% of the nation’s homeowners’ insurance lawsuits over claims filed while making up only 8% of the nation’s homeowners’ insurance claims, so we look forward to the Legislature taking additional measures to finish addressing this Florida-specific problem of frivolous lawsuits,” he said in an email.

People’s Trust has a business model that was seen by many as innovative when it was unveiled about five years ago. The company was one of the first to require the use of its own contracting companies to make repairs after claims were filed, and the insurer had prevailed in several court decisions in the last two years that upheld the requirement.

Some policyholders and their attorneys have complained that the restoration companies did not complete jobs or provided poor-quality work.