Just a day after being downgraded by ratings agency Demotech, Florida-based insurer Sawgrass Mutual Insurance Company has revealed it is under administrative supervision by the Florida Office of Insurance Regulation.
According to an amended consent order for administrative supervision dated Aug. 22, 2017, Sawgrass notified OIR of a plan for “orderly wind-down of the company’s operations” on Aug. 18, through a confidential consent order. The amended consent order said that plan is no longer feasible and that the move for administrative supervision should be made public “in order to facilitate the consideration of other plans for the orderly transition of Sawgrass’s business.”
Under Florida Law, administrative supervision is confidential unless otherwise specified. OIR may open the proceedings or hearings or make public the information.
The amended order states that “The Office finds and Sawgrass agrees, that it is in the best interest of its policyholders and the public to make this Consent Order public…” The order was signed by Sawgrass CEO Daniel O’Neal.
In a statement, OIR said “Under an Order of Administrative Supervision, the Office is working with Sawgrass Mutual Insurance Company and interested parties to develop a wind-down plan for the company, which includes the orderly transition of policies from Sawgrass to another insurer. Coverage for current Sawgrass policyholders remains in force until a plan is implemented. In the interim, policyholders may contact the Florida Market Assistance Plan to explore other options. Consumers may also research homeowners insurance companies through the Office’s CHOICES homeowners rate comparison tool via our website at www.floir.com.”
Sawgrass first became licensed in Florida in 2009 and currently has about 20,000 policies throughout the state with $35 million in premium written in the first quarter of 2017. The mutual insurer wrote voluntary homeowners through a network of independent agents. It bound just 222 new policies in Q1 of 2017, and had more than $39 million in exposure for policies in force that exclude wind coverage, according to OIR’s Quarterly Supplemental Report – Market Share Report system.
Sawgrass notified its agencies of the administrative supervision in an Aug. 22 email that was obtained by Insurance Journal. The email said the move is necessary “to allow Sawgrass and interested parties to develop a run-off plan for the company which includes the orderly transition of policies from Sawgrass to another insurer.”
The email further stated the plan could include the cancellation of all Sawgrass policies with at least 45 days’ notice and a guaranteed offer of coverage for those policies from another licensed insurer.
It appears Sawgrass’s problems began to brew after its second quarter earnings report, based on a downgrade in its Financial Stability Rating (FSR) of A (Exceptional) to L (licensed) from ratings agency Demotech on Aug. 21. Demotech released a statement saying the action was necessary despite a number of potential transactions in negotiation by the company.
“The company filed its initial year-end 2016 financial statement, reporting surplus in excess of $20 million, in a timely manner,” said Joseph Petrelli, Demotech president. “The company secured an effective reinsurance program prior to storm season. The focus of the company was to identify suitors and negotiate a transaction that was favorable to their policyholders rather than write additional new business.”
Demotech added the Sawgrass missed the deadline to report to Demotech the results of an independent audit and its second quarter 2017 financial statement, presented to Demotech on Aug. 16, as well as a revised year-end 2016 financial statement, “present surplus and other financial metrics at levels that no longer support the current FSR.”
Sawgrass did not respond to a request for comment from Insurance Journal.
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