HCI Approved by Florida Regulator to Replace Anchor P&C Coverage for 43K Insureds

By | February 18, 2020

The Florida Office of Insurance Regulation has approved a plan for Homeowners Choice Property and Casualty Insurance Company, a subsidiary of HCI Group, to provide replacement policies for Anchor Property and Casualty Insurance Co. policyholders. The approved plan provides policyholders guaranteed access to insurance coverage from HCI and was approved Feb. 13, 2020 in a consent order signed by Florida Insurance Commissioner David Altmaier.

The approval comes a month after it was announced that Anchor P&C’s rating would be downgraded and that HCI had entered into a preliminary agreement to acquire its policies.

Under the terms of the approved agreement, all Anchor policyholders will receive a notice from Anchor cancelling their current policy effective April 1, 2020. That cancellation notice will be accompanied by an offer letter and declarations page from HCI, outlining their replacement policy, also effective April 1, 2020. The HCI replacement policy will cover the remainder of the original Anchor policy term with identical rates and coverage, OIR said in a statement.

HCI said in its own statement on the definitive policy replacement agreement with Anchor P&C that the short-term replacement policies have “substantially the same terms and rates as the cancelled policies and expiring the same dates the cancelled policies would have expired had they not been cancelled.”

At the expiration of the replacement policy, eligible policyholders will have an opportunity to renew their policy with HCI. If the renewal policy rate or coverage terms differ from their current policy, HCI will provide policyholders with a notice of change in policy terms, detailing those changes.

Anchor will retain liability for policyholder claims arising from events occurring on or before March 31, 2020 and its policyholders will be under no obligation to accept the replacement policies, HCI and OIR said.

Letters from HCI and Anchor were sent to policyholders on Feb. 14 letting them know the remaining premium associated with their Anchor policy will be transferred to Homeowners Choice unless they decline coverage under the Homeowners Choice replacement policy.

No action will be required from policyholders for the replacement HCI policy to take effect, other than to pay premiums, if any, that may be due. Policyholders wishing to decline the replacement policy by HCI should contact their agent by March 31, 2020, to find alternate coverage and request a return of unearned premium.

The agreement contains no purchase price for the transition of business to Homeowners Choice, but to encourage a smooth transition, includes a payment based on the premium in force associated with the replacement polices remaining in force at June 1, 2020, HCI said.

“We are pleased to participate in this process, which ensures Anchor’s policyholders experience a seamless transition from Anchor to Homeowners Choice and continue to receive quality coverage for their homes,” said Karin Coleman, president of Homeowners Choice.

The preliminary agreement with Anchor Property & Casualty Co. was announced by HCI Group back in January as ratings agency Demotech stated that the insurer would be downgraded from a financial stability rating (FSR) of A, Exceptional, to M, Moderate. HCI did not disclose a purchase price for the Anchor portfolio at the time of its announcement.

Demotech said Anchor Property & Casualty’s ratings revision was based upon “significant alterations to its business model,” and said Anchor was committed to a “soft landing” for existing policyholders and claimants. Anchor stopped writing new business within the state of Florida in January.

OIR said Jan. 15 they received a letter of intent provided by the parties and that it was working with the companies to approve the run-off plan and ensure consumers have seamless access to coverage. The letter was marked “trade secret” and is confidential.

“OIR thoughtfully and carefully reviews these agreements to ensure policyholders are protected. I am committed to ensuring policyholders have continuous coverage throughout this process and have directed insurers to communicate clearly and use every resource to help them navigate this change,” Insurance Commissioner David Altmaier said after the agreement was finalized.

Anchor Property & Casualty was first licensed in Florida in 2014 to write homeowners insurance. At the same time, the company was granted approval by the state to assume approximately 50,000 policies from the residual market insurer Citizens Property Insurance Corp. starting in 2015. The company said then it had $35 million in capital to carry out its growth plans.

Anchor P&C was one of 16 carriers Demotech held off on affirming in early 2018, saying at the time it was waiting until it had analyzed year-end financial information, revised business plans and operating agreements for the year before deciding whether to affirm or making ratings downgrades.

Soon after, Anchor was infused with $17 million in investment capital from private equity firm Ambina Partners and co-investor Atalaya Capital Management and its ‘A’ rating was eventually affirmed. However, a representative from Ambina told Insurance Journal in an e-mail that the company and its co-investor Atalaya “successfully exited our investment in Anchor in January 2019.”

Demotech also announced last month that Anchor Specialty Insurance, another Anchor subsidiary that serves homeowners in areas with limited capacity, would be acquired by Weston Insurance Co. of Coral Gables, Fla.

Demotech said Anchor Specialty would maintain its Financial Stability Rating of A as a result of the acquisition. Anchor Specialty has an additional office in Beaumont, Texas, and is licensed to do business in Arizona, Georgia, Kentucky, Louisiana, Mississippi, Nevada, New Mexico, Oklahoma, South Carolina and Texas.

Weston Insurance was formed in 2011 and began writing policies effective 2012. Weston is a focused specialty insurer, underwriting coverage for losses from low-frequency, high-severity natural perils, including hurricane, other windstorm, hail and flood, for properties located at or near the coast. Weston underwrites personal residential, commercial residential and commercial non-residential properties, and is currently admitted in five U.S. states: Florida, Texas, South Carolina, Mississippi and Alabama.

According to its website, Weston has aggregate claims paying resources of $1 billion as of Sept. 30, 2019, $93.2 million in admitted assets and $41 million of statutory policyholder surplus. The company is rated ‘A’ by Demotech.

Florida Market Turmoil

The Anchor acquisition announcements come after Insurance Journal reported that Demotech could downgrade as many as 18 of the 46 Florida domestic insurers it rates in the coming weeks.

In a letter sent to Florida’s Citizens Property Insurance President and CEO Barry Gilway in December that was obtained by Insurance Journal, Demotech President Joe Petrelli outlined several factors in Florida that were placing insurer ratings in jeopardy, including abuse of assignment of benefits agreements and first party litigation.

“The economics of the marketplace over the past several years have made it impossible for Demotech to sustain each of the Florida focused carriers that we review each quarter at a [FSR] of A, Exceptional,” he said.

Petrelli said that after Demotech reviewed the third quarter 2019 financials of carriers, it requested year-end projections of operating results for nearly half of the 40-plus carriers it reviews and rates.

“Having provided these carriers with ample time to implement revised business models, secure capital infusions, implement rate revisions, re-underwrite established books of business and utilize other enterprise risk management activities, it is apparent that few have returned to profitability,” Petrelli wrote.

Petrelli told Insurance Journal that Demotech would not disclose the names of the insurers ahead of time, but expected to downgrade two to four companies by the end of January and then another four to six by the end of March.

Policyholders can research homeowners insurance options through the OIR rate comparison tool floir.com/choices or contact the Florida Market Assistance Plan at fmap.org.

Related:

About Amy O'Connor

O'Connor is the Southeast editor for Insurance Journal and associate editor of MyNewMarkets.com. More from Amy O'Connor

Was this article valuable?

Here are more articles you may enjoy.