Another young Florida property insurance company is in trouble with state regulators and could lose its license if it does not cut back on business, boost its reinsurance and explain some if its accounting.
Olympus Insurance Co. reported a surplus of $21 million at the close of 2009 and a profitable outlook for 2010. However, Insurance Commissioner Kevin McCarty and his Office of Insurance Regulation (OIR) say the surplus is now only $14 million.
OIR also said the insurer is continuing to increase its premium writings beyond what it did when it reported $50 million in surplus. In an official order last Friday. McCarty ordered the firm to “significantly” reduce its business.
According to the OIR, Olympus does not have adequate reinsurance to pay claims if there is a catastrophic event. OIR said that Olympus’ catastrophic plan for 2010 calls for it to retain $6 million in losses and pay $16 million for reinsurance in the event of a $47 million catastrophic event. However, even with surplus of $21 million, Olympus would become insolvent if it had to purchase reinsurance for a second event, according to OIR.
OIR also questioned a Sept. 2009 quota share reinsurance agreement that generated $18.2 million in commission and boosted underwriting income and surplus, as well as a deferred tax asset worth $3.1 million.
Regulators are also concerned that the company has been overpaying its affiliated managing general agent. OIR says Olympus MGA Corp. has been paid a 34 percent commission, even though the licensing agreement filed with the state was for a 22 percent commission with additional underwriting expenses capping this payout at 29 percent.
Olympus has filed a new MGA agreement with OIR that caps the fee to its MGA at 25 percent and caps total underwriting expenses at 28 percent.
Regulators told the Orlando-based company it has until May 7 to submit a corrective plan that addresses its reinsurance program, reduced business volume, profitability for 2010, the accounting of its quota share arrangement and the reasonableness of the $3.1 million deferred tax asset. Olympus must also attempt to gain addition capital form its holding company, Gemini Financial Holdings.
Its failure to comply could mean the loss of its license.
Olympus started writing insurance in the state in 2007.
Olympus is one of a half dozen smaller insurers caught up in a compliance crackdown by OIR in recent months.
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