The holding company for the insolvent FedNat Insurance Co. has filed for bankruptcy after an increase in severe weather events in the state weighed on its balance sheet, Bloomberg News reported.
The company filed for Chapter 11 bankruptcy in Fort Lauderdale on Sunday, court papers show. FedNat listed $33.8 million of assets and $171 million of debts in its bankruptcy petition.
FedNat, the property insurer, had racked up losses in recent years in part because more big storms hit coastal areas of the Southeast, where the company operates. It also suffered from the deluge of claims litigation dogging other small Florida insurers, officials have said. The company was deemed insolvent last fall and was placed into liquidation on Sept. 27.
Florida law does not provide for insurance companies themselves to declare bankruptcy, but must be rehabilitated or liquidated if they become insolvent.
“As an industry, the Florida property insurance industry lost over $1.6 billion in 2020 and over $1.5 billion in 2021,” thanks to losses from catastrophes, higher reinsurance costs and litigation abuse, Katie Goodman said in a sworn bankruptcy court statement. Goodman is managing partner with GGG Partners, a financial advisory firm that is managing the restructuring process.
Catastrophe losses cost FedNat $800 million on a gross basis last year, though reinsurance and other recoveries reduced that loss to $86 million, according to court papers.
At least five other Florida insurers have been put into receivership by state’s regulator this year.
FedNat has about $6.5 million of cash on hand, enough to keep operating the business during bankruptcy, the company said in a statement. FedNat will consider reorganizing the business or selling its assets during the Chapter 11 process, according to the statement.
FedNat generated a net loss of about $103 million in 2021, following a loss of nearly $80 million in 2020, company filings show. Its stock recently changed hands for one cent.
The case is FedNat Holding Co., 22-19451, U.S. Bankruptcy Court for the Southern District of Florida (Fort Lauderdale).
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