Some 150,000 Texas homeowners will be affected by the liquidation of Vesta Fire Insurance Co. and its Texas subsidiaries by the Texas Department of Insurance, but the situation seems to be not as dire as previously thought. The company was placed into liquidation by Texas regulators in July, and agents have been notified to cease writing new and renewal business; all policies with the companies will be canceled beginning Aug. 24. However, a number of other insurers and wholesalers have indicated their willingness to take over the homeowners policies of Vesta subsidiary Texas Select.
“After August 23, any claims will be paid by the [Texas Property & Casualty Insurance] Guaranty Association up to $300,000; unearned premium will be paid up to $25,000,” said TDI spokesman, Jim Hurley said.
Texas Insurance Commissioner Mike Geeslin, acting as Rehabili-tator, started the process to have Vesta and its subsidiaries placed into liquidation. Vesta is the parent company of four Texas-domiciled insurers: Texas Select Lloyds Insurance Co., Vesta Insurance Corp., Shelby Casualty Co. and Shelby Insurance Co.
Texas Select had approximately 154,000 active homeowners policies in Texas.
“We moved in this direction simply because the company did not have the capital to cover the risk to which they were exposed and we felt policyholders were at risk,” Hurley said.
Following an agreed order of rehabilitation for the Texas-domiciled companies obtained by the TDI on June 28, Geeslin appointed a Special Deputy Receiver who assumed control of Vesta and its subsidiaries upon the recommendation the companies could not meet their current obligations and in the long-term best interests of its policyholders.
Prior negotiations with potential buyers for certain Vesta insurers transpired with no completed transaction. According to Geeslin, Vesta’s problems include a series of hurricane losses driving a long-term need for capital.
The Insurance Council of Texas agreed with TDI’s decision to liquidate the company. They said Texas insurance companies were more than a little concerned about having to pick up the tab for such a large writer in the Texas homeowner market during what’s forecasted to be an above average hurricane season.
David Surles, director of professional liability for the Independent Insurance Agents of Texas, said his group is trying to keep its members up to date as things change. “Our job is to keep our members informed as we hear information from TDI and anybody else,” he said.
Surles praised insurers for rising to the occasion. “I have been really impressed with the way insurance companies have stepped up and indicated such a huge interest in taking over that business,” he explained. “I can’t imagine if this had happened three or four years ago during the mold crisis when there were no markets.”
IIAT has a list of companies and wholesalers on its Web site, www.iiat.org, that have expressed interest in taking on Texas Select business. “We haven’t heard from any agents that they are really having a problem placing business with somebody else. But in case there is a need, we do provide the list,” Surles said.
The Texas Insurance Profes-sionals/Professional Insurance Agents of Texas association also maintains a list in its Web site, www.piatx.org, of companies willing to take Texas Select customers.
Other states affected
According to the Massachusetts Association of Insurance Agents, Shelby Insurance Co. wrote approximately 5,200 property insurance policies through 32 independent insurance agents in Massachusetts. The New Jersey Department of Banking and Insurance said Shelby Casualty wrote about 11,000 homeowners’ policies, 1,200 renters’ policies, 3,000 fire policies and 3,000 condominium policies in New Jersey.
Similar to Texas, regulators in Hawaii and Florida have taken control of Vesta subsidiaries–Hawaiian Insurance & Guaranty Co. Ltd. (HIG) and Florida Select Insurance Co.
Hawaii Insurance Commis-sioner J.P. Schmidt said HIG policies were not being canceled. “We were able to obtain reinsurance to cover the book of business for HIG so that the people would have cover.”
The Hawaii Department of Insurance and state court are entertaining proposals from a number of companies and groups interested in purchasing HIG. “We are attempting to find a viable buyer who will be able to infuse the necessary capital to make them competitive in the market and financially sound once again,” Schmidt said. Noting HIG might be in a little better shape than some of the affiliates in the other states, Schmidt admitted rehabilitating a company is still a very difficult process. “It is going to be tough, but we have some hope here,” he said.
Ordered by the Second Judicial Circuit Court, Florida Select Insurance Co. consented to the Florida Department of Financial Services as its receiver. The Office of Insurance Regulation in Florida is monitoring several other insurers that are struggling to find sufficient reinsurance to help pay potential claims, according to OIR spokesman Bob Lotane.
Past president and education coordinator of the Latin American Association of Insurance Agencies Inc. in Miami, Dulce M. Suarez-Resnick, said, “I’m not sure what the impact in South Florida will be. We cannot afford to have more policies canceled or non-renewed. Citizens really can’t take on any more and they are trying to do their best–you really have to give them credit.”
She said markets have tightened their underwriting guidelines or have reduced the number of policies that can be written per month for the hurricane season in an effort to control their exposure. “It’s a prudent thing to do considering the past two storm seasons and the predicted storm season ahead,” she said.
“We are urging people not to wait until Aug. 23 to move their business. Agents are working very hard to make their policyholders aware of this and are moving their customers as rapidly as possible,” TDI’s Hurley said.