UPC Gives up the Ghost: Now in Orderly Run-Off, But Trouble May Be Brewing

By | August 25, 2022

United Property & Casualty Insurance Co., facing heavy losses, in July put out feelers for a potential sale or merger with another carrier, after a ratings downgrade and a substantial reorganization plan.

But the firm’s holding company announced Wednesday that it’s now pulling out of the market altogether in several states.

UPC has filed plans of withdrawal in Florida, Louisiana and Texas and will soon file a withdrawal plan in New York. The company, which until this year held 180,000 policies in Florida, will non-renew personal lines in those states and has placed itself into an orderly run-off, UPC said in a news release.

“Due to significant uncertainty around the future availability of reinsurance for our personal lines business, I believe placing United P&C into an orderly run-off is prudent and necessary to protect the company and its policyholders,” UPC Chairman and CEO Dan Peed said in a statement. “The company is actively pursuing opportunities to leverage our people, technology, and other capabilities.”

UPC was founded in 1999 and is headquartered in St. Petersburg, Florida. Late last year, the company suspended new homeowners business in Florida. This year, parent company United Insurance Holdings went through a major restructuring, consolidating four subsidiaries into two.

The moves came after heavy underwriting losses in 2021 and early this year. In recent months, the carrier has taken a number of steps to improve its balance sheets. In June of this year, UPC announced it had merged its subsidiary, Family Security Insurance, into UPC. The OIR approved it. Family Security held 1.84% of the Florida market at the end of 2021, the AM Best financial rating firm reported.

In July, the Demotech financial rating firm downgraded UPC’s financial strength rating. About that time, UPC said it was exploring a range of options, including potential sale or merger with another insurer.

That apparently did not happen. UPC did not address a sale in its Wednesday news release and an investor relations official could not be reached on Thursday.

The company said renewal rights for its policies in Georgia, South Carolina, and North Carolina have been sold and all premiums and losses have been ceded.

The orderly run-off may not be so orderly, and UPC’s announcement raises questions about Florida’s recent plan to protect homeowners who are covered by unrated or downgraded carriers, said Mark Friedlander, communications director for the Insurance Information Institute.

“It clicked with me that this isn’t going to work,” he said Thursday.

After Demotech in July told more than a dozen insurers that they would soon see a downgrade or rating withdrawal, it set off alarm bells for insurers, agents and Florida regulators: Fannie Mae and Freddie Mac, the quasi-governmental corporations that purchase mortgages from primary lenders, won’t back loans if the homeowners’ insurer is not top rated.

To get around that, Florida officials said last month that they had found an exception to the rules: If an insurer can show that all claims will be paid in case of insolvency, a financial rating is not required.

The state-created Citizens Property Insurance Corp. would serve as the backstop, utilizing a type of reinsurance arrangement known as a cut-through endorsement, Florida regulators announced. The Florida Insurance Guaranty Association would pay an insolvent insurer’s claims up to a statutory limit of $500,000, and Citizens would step in after that, at least for a year, according to the plan.

But Friedlander said Thursday that sources with Fannie Mae have told him that, a month after the plan was announced, the mortgage-buying company is still analyzing the proposal.

“That sounds to me like they’re not going to accept the Citizens back-stop plan,” he said.

Fannie and Freddie officials have not returned phone calls and emails from the Insurance Journal about the issue.

Thursday evening, Demotech announced it had withdrawn United’s rating altogether. Without a rating, and without a Citizens back-stop plan, UPC policyholders and Florida insurance agents may now find themselves in an urgent situation. An orderly run-off usually means that policies will be discontinued over a one-year period. But without a financial rating for UPC, Fannie and Freddie may now insist that homeowners with UPC policies find new coverage much sooner or be force-placed, Friedlander said.

Floridians with UPC policies should start looking for a new carrier immediately, he said.

The situation also could mean that UPC won’t be able to stay above water much longer, won’t be able to pay claims, and will be forced into insolvency and receivership within days, Friedlander predicted.

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Latest Comments

  • October 26, 2022 at 2:56 pm
    FL Home Owner 2 says:
    They dropped me on the 10/12/22 and the following week they doubled my premiums and extended a new policy. They good thing i wont renew after reading this article. Thank you
  • October 12, 2022 at 8:50 am
    Dick Natalizio says:
    I totally agree that the hurricanes aren't killing the Fl insurance market the lawyers and contractors are the real culprits. The sooner we outlaw litigation in favor of arbit... read more
  • September 25, 2022 at 2:05 pm
    Gary Osterhoudt says:
    I renewed in June with a 50% increase in Georgia. Just received a cancellation notice (Sept. 23 to cancel Oct. 1), based on them pulling out of Georgia, giving me a weeks noti... read more

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