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Florida personal lines insurer Florida Specialty Insurance Co. (FSIC) has been ordered into receivership and will be liquidated after state regulators determined the company is insolvent and unable to establish a viable business plan moving forward.

The Florida Department of Financial Services has been appointed as the receiver and the insurer’s more than 90,000 policyholders have been notified to find a new insurance company immediately. DFS has also alerted agents to assist their policyholders with finding new coverage.

The move comes after regulators say they have spent more than a year helping the company develop a plan to continue, and just over a month after ratings agency Demotech downgraded its Financial Stability Rating (FSR) of the company from A (Exceptional) to M (Moderate).

The Florida Office of Insurance Regulation alerted DFS that grounds existed for the initiation of delinquency proceedings by DFS’ Division of Rehabilitation and Liquidation on Sept. 27, and the order was executed on Oct. 2 by the Second Judicial Court in Leon County.

OIR said in an email to Insurance Journal the company has about 90,000 policies in force in Florida, with the majority of those (40,000) being homeowners and 28,000 being mobile home policies. The company also wrote dwelling fire, HO-6, and wind only policies. All of the company’s policies will terminate on Nov. 1, 2019.

OIR placed Florida Specialty under administrative supervision in March of this year and said it has attempted to help Florida Specialty for over a year to develop a viable business plan.

“When it became clear that Florida Specialty was unable to develop such a plan, OIR worked with the Department of Financial Services, Citizens Property Insurance Corporation, and FIGA [Florida Insurance Guaranty Association] provide Florida Specialty policyholders with a path for coverage options in the private market or guaranteed coverage with Citizens if private market coverage could not be secured,” said Florida Insurance Commissioner David Altmaier in a statement to Insurance Journal. “Our goal has been to protect consumers, who are especially vulnerable during hurricane season, and to encourage consumers to seek coverage in the private sector. While we never want to see an insurer go into receivership, the good news is that we have a safety net in place to protect consumers.”

OIR detailed four bases for Florida Specialty to be entered into receivership in an affidavit from Virginia Christy, OIR’s director of the Property & Casualty Oversight business unit, including:

• Florida Specialty is impaired or insolvent or about to be
• Further transaction of insurance by Florida Specialty is hazardous to policyholders, creditors, stockholders or the public
• Florida Specialty has willfully violated Florida Law
• And Florida Specialty have consented to rehabilitation or liquidation.

OIR contends in the affidavit that Florida Specialty is operating under the $10 million surplus required by Florida Insurance Code due to tax liabilities that it will not be able to meet because of its lack of positive income and non-recoverable reinsurance amounts.

OIR also states Florida Specialty saw a “sudden and significant” decrease in surplus and profitability of $14.5 million in policyholder surplus as of the second quarter of 2019 – a 59.1% decrease compared with the second quarter of 2018. OIR noted Florida Specialty experienced an adverse loss reserve development pattern between 2017 and 2018 and has been “consistently underestimating its actual losses and failing to establish adequate reserves for those losses.”

In addition, OIR said Florida Specialty violated the terms of the administrative supervision order it entered into with the regulator in March for the purposes of “protecting its assets and the interests of its insureds,” according to OIR. In July, the order was extended through Nov. 15.

OIR said that Florida Specialty was to obtain prior written consent from the office before conducting certain activities as part of the supervision order that it agreed to. However, in April, Florida Specialty announced it would non-renew a portion of its HO3 portfolio without prior approval from OIR.

OIR stated it worked with Florida Specialty during the administrative supervision to “review and evaluate multiple proposals, acquisition offers, renewal rights agreements, and other agreements that would facilitate a transfer of its policyholders to reliable insurers. No proposal submitted has proved to be viable.”

In an e-mail to Insurance Journal, OIR said that over the last year Florida Specialty was required to file a corrective action plan that included a solution for the ongoing operation of the company including a sale, merger, change of business plan or other measures to address its “hazardous financial condition.” It also requested information regarding its reinsurance program to demonstrate that Florida Specialty had sufficient catastrophe insurance to provide for the upcoming hurricane season, requested a schedule of outstanding claims and renewals, and placed a limit on its expenditures.

Multiple requests for comment emailed to company officials were not returned.

History of Issues

Demotech noted Florida Specialty’s financial troubles in early 2018 in a Florida insurer ratings update that indicated more than a dozen Florida domestic insurers could face potential rating actions due to a combination of 2017 catastrophe losses and assignment of benefits litigation, as well as judiciary changes in the state that could impact insurers. All of the insurers were later affirmed except Florida Specialty, which Demotech affirmed shortly after the firm developed and planned to implement a business plan that Demotech said at the time met its criteria.

That business plan included a loss portfolio transfer of the company’s net losses to Sirius America Insurance Co., as well as reinsuring the balance of its net premium effective Feb. 28, 2018, also with Sirius America. That plan was pending OIR approval.

On Aug. 2 of this year, Demotech again affirmed Florida Specialty’s “A” FSR based on the company’s measures undertaken to revise its business model. However, on Aug. 16 Demotech issued a ratings downgrade, saying in a statement on the downgrade that the action was “necessary despite potential transactions being pursued by the company.”

Demotech President Joe Petrelli said in an email to Insurance Journal that the transaction that was referenced in the 2018’s ratings update and the transaction mentioned in its August press release are “separate and distinct.”

In the ratings downgrade announcement in August 2019, Demotech said that Florida Specialty reported surplus in excess of the $10 million statutory minimum as required by Florida Insurance Code, but that the company noted in its most recent financial statement it had “substantial doubt” in its ability to continue operating “given the current environment in the state of Florida and none of the transactions under consideration have been executed.”

“The company, albeit above the state minimum as to surplus, does not meet the financial metrics associate with an FSR of A,” Petrelli noted.

Despite Florida Specialty’s issues, Petrelli maintained that Florida Specialty “has plenty of cash and was well positioned for a voluntary runoff.”

Petrelli told Insurance Journal that while the liquidation should work for consumers, he is concerned about the cancellation of the company’s reinsurance.

What’s Next

The focus for regulators has now turned to ensuring Florida Specialty’s 90,000-plus policyholders find a new insurer and any outstanding claims are settled.

DFS began notifying policyholders and agents of the Florida Specialty liquidation last week and has provided information on its website on how to obtain new coverage and handle open claims. In an October 2 email to agents, DFS said the liquidation order legally imposes certain obligations on agents and they are expected to contact policyholder clients and assist them with any questions regarding the receivership proceeding.

“As an agent for FSIC … you are required to provide a written notice of the receivership, by registered or certified mail, or by email with delivery receipt required, to the last known address of policyholders whose policy has not been replaced or reinsured with a solvent authorized insurer,” the letter states.

Agents are advised to first look for coverage in the private market for any Florida Specialty policyholders and if that is not available, coverage can be placed with Citizens Property Insurance Corp.

Consumers must have an agent in order to access coverage through Citizens. Spokesperson for Citizens Michael Peltier told Insurance Journal that Citizens will assist consumers in finding an agent if they do not have one.

“Part of Citizens’ statutory mission is to protect Florida homeowners when they need it most,” said Barry Gilway, Citizens president/CEO and executive director. “Having 90,000 homeowners unexpectedly lose coverage in the middle of an already active hurricane season meets that criteria. We are working with the Department of Financial Services and Office of Insurance Regulation to provide an expedited process for Florida Specialty policyholders who need coverage to obtain an offer from Citizens.”

Gilway added that going forward, Citizens will continue to work with the private market through Citizens depopulation program and the Property Insurance Clearinghouse to find comparable private options for policyholders and maintain Citizens’ role as Florida’s residual insurer of last resort.

Citizens will begin reaching out to policyholders this week and has set up a website for information.

The Florida Insurance Guaranty Association [FIGA] will be responsible for any payment of covered claims occurring prior to the finding of insolvency and will provide coverage for policyholders for the 30-day period between the order of insolvency and the cancellation of the coverage (Nov. 1). FIGA will also return unearned premium to Citizens or policyholders. OIR said Florida Specialty currently has 60 open Hurricane Michael claims.

The Florida Association of Insurance Agents (FAIA) is also working with its agents to assist them with obtaining coverage for their insureds. FAIA President and CEO Jeff Grady said the association is thankful that Citizens has created a safety net for the more than 90,000 policyholders now needing a new insurer.

“Not only has Citizens created an expedited process for obtaining coverage, but they have also worked out an arrangement with FIGA for the easy transfer of any returned premium that is due,” Grady said. “Finally, Citizens has also created a relatively easy appointment process for agents that are not currently appointed with the company. Most Florida Specialty policyholders will likely experience an increase in their annual premium, whether they are able to find coverage in the private market or from Citizens.”

Please click the image below to donate to the American Red Cross Hurricane Dorian Relief Fund:

Don’t be lulled by a quiet June and July, the real Atlantic hurricane season is about to kick off.

The hurricane season generally runs from June 1 to the end of November. But the next six weeks — “the season within a season” — is regularly the most dangerous and active time for storms to develop in the Atlantic, said Dennis Feltgen, spokesman for the National Hurricane Center in Miami.

Only two named storms have developed in the Atlantic so far this summer. Dry, dusty air from Africa’s Sahara robbed potential storms of moisture, and wind shear spurred by the El Nino climate systems ripped apart budding storms. Now, those brakes on hurricane development are gone.

The result: “A big change in the pattern over the Atlantic, going from a very lackluster quiet weather pattern to a much more active one,” said Dan Kottlowski, the lead hurricane forecaster at AccuWeather Inc. in State College, Pennsylvania. “We are thinking this season will be back-loaded.”

Last week, the U.S. National Weather Service forecast 10 to 17 named storms in the Atlantic. Last year, there were 15, including hurricanes Florence and Michael that killed a combined 96 people and caused more than $49 billion in damage. A storm is named when it reaches tropical storm strength, with maximum sustained winds of at least 74 miles per hour.

At risk is $17 trillion in U.S. real estate along the coasts, as well as some of America’s most valuable commodities. More than 45% of U.S. refining capacity and 51% of gas processing is along the Gulf of Mexico coastline. Florida is the world’s second-largest producer of orange juice after Brazil.

There are two other factors that could spur on storms in September, according to Bob Henson, a meteorologist with Weather Underground, an IBM business.

The first is the so-called Madden-Julian Oscillation, a ripple of rising and sinking air that swirls through the atmosphere about every 45 to 60 days that can spark typhoons and hurricanes when combined with other factors. It could affect the Atlantic in late August or September, Henson said.

The second is a fast-moving atmospheric system known as a “convectively-coupled kelvin wave” that’s affected by the earth’s rotation. When one runs into a tropical wave moving off Africa, it can give it a speedy boost to swirl into a hurricane or tropical storm. There is one now moving across the Pacific on its way to the Atlantic, Henson said.

Two Calm Weeks

All of this doesn’t mean the Atlantic will pop to life at high noon on August 20. The next two weeks should extend the streak of drifting doldrums across the basin, Henson said.

Once they do start rolling, though, look out. There is a deep pool of warm water tucked into the Gulf of Mexico, across the western Caribbean and along the U.S. Southeast coastline, according to Jim Rouiller, chief meteorologist at the Energy Weather Group outside Philadelphia. Any storm that reaches those areas could explode in power, he said.

“This is high-octane fuel that is all waiting in the wings for the first storm,” Rouiller said. “This is all untapped, and it will really intensify storms.”

Government meteorologists say this year’s hurricane season may be busier than initially expected now that summer’s weak El Nino has faded away.

The National Oceanic and Atmospheric Administration’s Climate Prediction Center said Thursday the Atlantic season looks more active than normal as peak hurricane season begins. Forecasters now expect 10 to 17 named storms, with five to nine hurricanes and two to four major ones.

In May, they forecast a normal season, one or two fewer named storms and hurricanes.

Forecaster Gerry Bell says the end of El Nino means more hospitable hurricane conditions. El Nino is the periodic warming of parts of the Pacific that affects weather worldwide and dampens storm activity.

Hurricane season is June through November. So far, there have been two named storms, with one hurricane.

Officials in the southwest Florida city of Naples say they lost $700,000 in a recent cyberattack.

The Naples Daily News reports that the attack was a “spear phishing” effort targeting a specific person or department and that appeared to be from a trusted source.

Authorities say the money was paid to a fake bank account the attacker provided while posing as a representative from the Wright Construction Group, which was doing infrastructure work in downtown Naples.

City Manager Charles Chapman says the attack was an isolated incident and has not impacted the city’s data systems.

Chapman says a criminal investigation has been launched.

Other Florida cities including Key Biscayne, Riviera Beach and Lake City have also been targeted in cyberattacks.

Olympus Insurance Co. has appointed James “Jim” Carpenter as assistant vice president of Sales and Marketing.

Carpenter has more than 20 years of experience in the property & casualty insurance industry, seven of which he spent at Tower Hill Insurance. He also worked for two years as an underwriting manager at Vanguard before switching to the sales side.

He worked in marketing with Florida Family for 11 years, and then spent a year and a half with Prepared Insurance before being asked to step into the assistant vice president of Sales and Marketing role with Olympus Insurance.

Headquartered in Palm Beach Gardens, Fla., and founded in 2007, Olympus Insurance Company specializes in Florida property insurance. Through its independent agency force, Olympus insures $40 billion worth of residential and investment property including homes, condos, rental properties and valuable personal property, with umbrella coverage and Spartan Enhanced Coverage available.

Florida-based Olympus Insurance Co. has added Nathan Kochilaris as the company’s new Southwest Florida Sales manager.

Kochilaris will work under Vice President of Sales and Marketing Crystal McInnis.

Kochilaris has experience in both the insurance and real estate sectors. He previously worked as a branch manager for Bank of America before launching his career in the insurance industry with Brown & Brown Insurance Agency in 2008. His past experience includes serving as team leader, account manager, and risk advisor working with multiple Florida insurance agencies in Sarasota.

Kochilaris is 215 and 220 licensed, and obtained his CPIA designation in 2017. He brings over five years of experience writing Olympus policies to his new role as Regional Sales manager.

Headquartered in Palm Beach Gardens, Fla., and founded in 2007, Olympus Insurance Co. specializes in Florida property insurance. Through its independent agency force, Olympus insures $40 billion worth of residential and investment property including homes, condos, rental properties, and valuable personal property, with umbrella coverage and Spartan Enhanced Coverage available.

Long-awaited reforms for Florida’s assignment of benefits (AOB) crisis that the insurance industry and consumer advocates say has led to less coverage and higher rates for Florida property owners will officially become law July 1.

Florida Governor Ron DeSantis signed House Bill 7065 on Thursday, marking the end to a seven-year battle by the industry and reform advocates seeking a solution to escalating abuse of the policyholder benefit.

“I thank the Florida Legislature for passing meaningful AOB reform, which has become a racket in recent years,” DeSantis said in a statement. “This legislation will protect Florida consumers from predatory insurance practices.”

DeSantis previously indicated he would sign the bill after it was passed by lawmakers in April, saying “the exponential growth in AOB abuse has contributed to mounting insurance costs for Floridians for far too long.”

“By signing House Bill 7065, we will better protect consumers from those who would take advantage of them by abusing the Assignment of Benefits process,” Florida Insurance Commissioner David Altmaier said in a statement after DeSantis signed the bill.

The bill’s provisions:

• Define “assignment agreement” and establishing requirements for the execution, validity, and effect of such an agreement
• Prohibit certain fees and altering policy provisions related to managed repairs in an assignment agreement
• Transfer certain pre-lawsuit duties under the insurance contract to the assignee and shifting the burden to the assignee to prove that any failure to carry out such duties has not limited the insurer’s ability to perform under the contract
• Require each insurer to report specified data on claims paid in the prior year under assignment agreements by Jan. 30, 2022, and each year thereafter
• Allow an insurer to make available a policy prohibiting assignment, in whole or in part, under certain conditions
• Revise the state’s one-way attorney fee statute to incorporate an attorney fee structure in determining the fee amount awarded in suits by an assignee against an insurer
• Require service providers to give an insurer and the consumer prior written notice of at least 10 business days before filing suit on a claim.

The bill also requires savings be passed along to Florida consumers who are covered by Citizens Property Insurance Corp., which has borne the brunt of AOB abuse.

In South Florida in particular, AOB lawsuits have exploded over the last 10 years and Citizens has filed for rate increases to offset litigation costs. It proposed rate increases for 97 percent of its homeowners policyholders for 2019.

Written into the bill is a stipulation stating Citizens “may not implement rate changes in 2019 for DP-3 and HO-3 policies unless the rate filing reflects projected rate savings from this act.”

Citizens said in a statement after the passage of the bill that its actuaries estimated reforms would reduce the statewide average rate need from 25.2% to 10.1% for homeowners policyholders. In South Florida, the average rate need would drop from 30.4% to 12.8%.

Citizens spokesperson Michael Peltier told Insurance Journal in April that the insurer is planning to refile its rate request in the coming months. It plans to release further details at a later date and will work with the Florida Office of Insurance Regulation (OIR) on timing.

Barry Gilway, president, CEO and executive director of Citizens praised the signing of the bill on Thursday.

“This new law represents a major step forward in our efforts to stem rising premiums caused by unnecessary litigation and assignment of benefits abuse. It is going to make a difference,” he said in a statement.

Florida CFO Jimmy Patronis said Florida consumers are the biggest winners with the soon-to-be law’s protections.

“This year, we advocated for Florida homeowners and passed reforms to help stop rampant lawsuit abuse across the state. My fraud detectives, as well as sheriffs, state attorneys and other law enforcement leaders have joined our efforts to create a Fraud Free Florida, and this new law furthers this mission,” Patronis said.

Other industry groups also praised the passage of the bill.

“We are grateful that AOB reform is now officially here for homeowners, so fewer Floridians can be taken advantage of during their times of need,” said Michael Carlson, president of the Personal Insurance Federation of Florida (PIFF).

On Friday, the governor also signed House Bill 337, which contains language providing that the attorney’s fee provisions of HB 7065 takes effect once the bill has been signed by the governor and becomes law. Lawmakers added the effective date for the attorney fee provision to HB 337, which was already the works, in response to claims by law firms profiting off of AOB agreements that they would rush to file cases and continue AOB abuse before the law takes effect on July 1.

Lead Florida AOB attorney Harvey Cohen posted a video within days after the reforms were passed urging vendors to submit their AOB agreements for litigation as soon as possible. The video was circulated by the Florida Consumer Protection Coalition in a news release titled “Shameless.”

“The law takes effect July 1, so you need to have your documents sent to us right away. Make sure we get all of these cases filed well before July 1,” Cohen said. “You can imagine, at the end of June there is going to be a mad rush to get everything filed.”

Fred E. Karlinsky, co-chair of law firm Greenberg Traurig’s Insurance Regulatory and Transactions Practice Group in Florida, said adding the effective date to HB 337 was a wise move by lawmakers.

“This predatory practice has cost the citizens of the state of Florida tens of millions of dollars and the legislature and governor clearly wanted to put an immediate end to it,” he said.

As many as 8 hurricanes may form in the Atlantic in 2019, a “near normal” season following two years of storms that have left a trail of death and destruction in the Caribbean and U.S. coast.

Nine to 15 named storms are forecast during the six-month season that starts June 1, according to the National Oceanic and Atmospheric Administration, which has been largely correct with its predictions in recent years. Of those, 4 to 8 will become hurricanes and 2 to 4 will be major systems with winds of 111 miles (179 kilometers) per hour or more.

“It only takes one landfalling hurricane to create great destruction to a community, we need to prepare now,” said Daniel Kaniewski, a deputy administrator of the Federal Emergency Management Agency.

The hurricane season will be closely watched because of its potential to take a heavy human toll as well as rattle oil and gas markets across the globe. Over the past two years, storms including Michael, Irma and Harvey led to scores of deaths and over $250 billion in damages. They have also sent U.S. gasoline prices surging, shifted global crude and fuel flows, disrupted production in the energy-rich Gulf Coast and threatened crops.

This year is the fifth time in a row that a system has spun up in the Atlantic before the official June 1 start to the season, with Subtropical Storm Andrea forming earlier this week. A system gets a name when it reaches tropical storm strength with winds of 39 mph.

Still, a lingering El Nino weather phenomenon in the equatorial Pacific could help keep overall storm numbers lower by creating wind shear across the Atlantic that rips budding systems apart, said Neil Jacobs, acting NOAA administrator. In April, Colorado State University predicted 13 storms could be named in the Atlantic this year.

Energy markets will focus on the potential impact in the Gulf Coast, which accounts for 45% of U.S. refining capacity and 51% of gas processing. About 5% of the nation’s natural gas and 17% of crude comes out of the Gulf of Mexico, according to the Energy Information Administration.

There are also more than 6.6 million homes with an estimated reconstruction cost of $1.5 trillion along the Atlantic and Gulf coasts, according to the Insurance Information Institute in New York. Florida is the world’s second-largest producer of orange juice.

In 2018, storms Michael and Florence struck the U.S. South, causing widespread damage that’s still lingering as residents struggle to rebuild. Florence ripped into North Carolina in September, bringing record storm surge and rain that flooded homes and businesses before causing additional destruction across South Carolina. It’s blamed for 52 deaths, according to the National Hurricane Center.

The following month, Hurricane Michael leveled homes in Florida’s panhandle when it came ashore near Mexico Beach. The storm killed at least 16 and caused $25 billion in damage, the National Hurricane Center said. It was the third most intense storm in terms of central pressure and brought the fourth strongest winds of any to hit the contiguous U.S. on record.

Both storm names have been retired from official lists.

Press Release

Olson & DiNunzio Insurance Agency, Inc. Receives Accreditation from
Better Business Bureau Olson & DiNunzio Insurance Agency, Inc., a Insurance Companies company located at 2536 Northbrooke Plaza Dr, announced today that it has met the accreditation standards required by the Better Business Bureau for membership with the organization.

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BBB Accreditation means Olson & DiNunzio Insurance Agency, Inc. adheres to very high ethical standards. People know they can trust a company that has made the commitment to live up to the BBB Principles for Trust:

Build Trust, Advertise Honestly, Tell the Truth, Be Transparent, Honor Promises, Be Responsive, Embody Integrity, Safeguard Privacy.

Being affiliated with the BBB shows Olson & DiNunzio Insurance Agency, Inc. is one of a select group of businesses in our community that not only supports the BBB's services but also subscribes to the idea that ethical business is good business and that you "deliver trust" by treating the public in a fair and honest manner. 

Media Contact:
Olson & DiNunzio Insurance Agency, Inc.
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