The future for Florida’s Sunshine State Insurance Co. (SSIC) is unclear now that a deal by another insurer to rescue it has fallen through.
United Insurance Holdings Corp. (UPC Insurance Co.) yesterday announced it had terminated its bid to acquire financially-troubled Sunshine State, a property/casualty insurer that is under a consent order to raise its surplus or shed its business.
UPC announced its intent to rescue Sunshine State on May 15, 2014, the date by which the Florida Office of Insurance Regulation (OIR) and Commissioner Kevin McCarty had said in a March consent order that Sunshine State had to either raise capital to bring its surplus level to $15 million or present an agreement for acquisition or recapitalization.
UPC Insurance, based in St. Petersburg, had said it would make a capital infusion into SSIC to restore its Demotech financial rating and satisfy regulatory requirements.
The OIR’s March consent order came after Sunshine State reported to the state in February that its 2013 financial statement would be late because it had discovered accounting errors relating to reinsurance contracts from 2008 to 2011 that required correction. The insurer told OIR that fixing the errors would negatively affect its surplus, as would fourth quarter losses.
The insurer agreed to stop writing new business. It also agreed to halt payments to its owner, reinsurance broker US Re, and to all affiliates, while promising to honor all claims on its Florida policies.
SSIC, based in Jacksonville, Fla., offers homeowners, dwelling fire and federal flood insurance through 500 independent agents primarily in the Northeast and North Central territories of Florida. SSIC reported $68 million in gross written premium in 2013.
The March consent order said that if it was unable to raise capital or be acquired, Sunshine State would have to begin cancelling policies or transferring them to another licensed insurer and give its policyholders 45-day notice.
The path forward for Sunshine State and its customers is still being determined.
OIR is “exploring options to ensure a smooth transition for policyholders,” according to Harvey Bennett, OIR’s communications director.
For its part, UPC Insurance did not say why it pulled out of the deal.
“While we are disappointed not to be able to move forward with this acquisition, we are confident that this decision is in the best interest of our shareholders,” said John Forney, president and CEO of UPC Insurance.
He said his company will continue to grow organically and seek “other complementary growth opportunities” but that the company “will always remain disciplined” in its approach.
UPC had said that the Sunshine acquisition would improve its spread of risk and provide growth in parts of Florida where it currently has limited exposure.
United Property & Casualty Insurance Co., the primary operating subsidiary of UPC Insurance, writes in Florida, Massachusetts, New Jersey, North Carolina, Rhode Island, South Carolina and Texas, and is licensed to write in Louisiana, Georgia and New Hampshire.