Rehabilitation of Florida Insurer Windhaven Deemed ‘Useless’; Judge Orders Liquidation

Plans to rehabilitate Florida auto insurer Windhaven Insurance Co. have been deemed “useless” and the company will instead be liquidated.

In a Jan. 6 order, Leon County Court Judge Ronald W. Flury said the Florida Department of Financial Services, which was appointed as receiver last month, notified the court Dec. 23 that the Florida auto insurer is insolvent, and the court determined sufficient grounds exist for its liquidation.

Windhaven Insurance Co. (WIC) became licensed in Florida in 2005 as a domestic insurer to write private passenger auto liability and private passenger auto physical damage lines of business and has about 73,000 active policies in the state as of Nov. 30, 2019. WIC is the carrier for its Windhaven, Icon, Select and Optimum auto insurance programs.

DFS was appointed receiver for the purposes of liquidation, effective Jan. 6, 2020, and has been authorized to take possession of all assets, estate, and property belonging to the insurer.

All policies of insurance or coverage contracts that have not expired will be canceled as of Feb. 5, 2020.

The non-standard private passenger auto insurer, based in Miami, was first placed into rehabilitation in early December after DFS filed a petition with the court stating that WIC’s surplus was considered impaired.

DFS said in its Dec. 23 petition for liquidation that Windhaven’s Sept. 30, 2019 quarterly financial statement reflected a policyholder surplus of $1.7 million, which is nearly $7 million below the surplus amount required by Florida law.

DFS also stated the company had more than $7.4 million worth of claims checks that had been issued and mailed in 2019 but have not yet been cashed by the recipients.

“The Department has determined that any further efforts to rehabilitate Windhaven would be useless and the financial condition of Windhaven makes liquidation necessary,” the DFS petition states.

WIC was first placed on administrative supervision by OIR in November, and later consented to being placed into receivership after OIR determined it failed to comply with the supervision order.

According to the court documents, WIC reported a $26 million policyholder surplus on its Sept. 30, 2019 monthly statement, but on Nov. 13 it notified the Florida Office of Insurance Regulation (OIR) that a contingent commission liability of $19.1 million was realized but had not been reported on the September financial statement, thus reducing its surplus by the commission liability amount. WIC also notified OIR that its reserves were deficient by $7 million.

Those court documents also stated WIC is insolvent because all of its assets would not be sufficient to discharge all of its liabilities or that it is unable to pay its debts. WIC’s reported total liability as of Sept. 30 was more than $131 million and its total assets were $157.5 million. After the adjustment for the contingent commission and reserve deficiency, OIR determined WIC’s assets were insufficient.

WIC also suffered a decline in policyholder surplus of 22.8% — or nearly $11 million – between 2017 and 2018 and suffered a $9.7 million net loss for 2018, which represents nearly 20% of its 2017 year-end surplus in regards to policyholders, making its further transaction of insurance hazardous to policyholders, creditors, stockholders or the public, the court documents state.

According to the affidavit, WIC’s 2018 annual statement also shows a “pattern of adverse loss reserve development which reflects that [it] has been consistently under-estimating its actual losses and failing to establish adequate reserves for such losses.”

WIC’s condition worsened in 2019, with its invested assets declining from $74.2 million in the first months of 2019 to $41 million – a 44.6% decrease.

Once placed in rehabilitation, Windhaven let its agents know it was working closely with DFS to come up with a viable plan for the company through the rehabilitation.

“Rehabilitation’ proceedings provide a safe landing spot for WIC and its policyholders while we and the DFS continue to assess and address WIC’s financial challenges,” an e-mail to agents stated. “… We are also working on other possible partnerships for Windhaven, Icon, Select and Optimum auto policies to continue to ‘live’ with us, to minimize disruption and provide a competitive marketplace in Florida for insureds and your business.”

DFS notified agents Dec. 30 that Windhaven would be liquidated and that Windhaven agents are required to provide written notice of the receivership to policyholders whose policy has not been replaced or reinsured with a solvent authorized insurer within 15 days of the notice. Agents must also account for all premiums and unearned commissions collected on behalf of Windhaven to DFS within 20 days of demand by the department.

The Florida Insurance Guaranty Association [FIGA] will pay covered unearned premium claims after DFS completes its processing of the policy records and sends the unearned premium records to FIGA. A statutory $100 deductible will be applied to the refund. DFS said FIGA will pay any outstanding claims for Windhaven policies. All claims must be filed by Jan. 6, 2021.

Update: The Florida Department of Financial Services said in an e-mail to Insurance Journal regarding the payment of owed commission to Windhaven’s agents that one of the department’s top priorities “is fulfilling policyholder claim payments. Distribution of further claims from the insurer’s estate shall be in accordance with the order in which each class of claims is outlined in statute.”

Read: DFS Motion for Windhaven Liquidation

Read: DFS Letter to Windhaven Agents