United Insurance Holdings Corp. has highlighted how it continues to face great uncertainty after the takedown by Demotech of its United Property & Casualty Insurance Company (UPC), although it was deemed eligible for support through the Citizens Guarantee Scheme.
Demotech downgraded United Property & Casualty Insurance Company two notches to “M” last week, putting the carrier at risk.
The company, United (UPC) highlighted why this is taking a risk yesterday in writing, highlighting the challenges they are facing in Florida, and what may happen in other states.
Interestingly, United (UPC) first highlighted that this decline “may result in UPC’s inability to obtain insurance coverage.”
Although this is a risk to its business, because the carrier uses more traditional insurance and other support methods, it seems that the company can get additional insurance when needed, but it will not be the same as the one that was changed before.
The reinsurance markets may look for more stringent terms, or higher rates, from carriers that have been downgraded and that is the real risk of reinsurance going forward, affordability.
The second risk shown is the main one discussed by Demotech’s downgrade, that “it may make UPC products unacceptable to borrowers and prevent agents from selling and shipping UPC products.”
But, as we said recently, United (UPC) has been deemed worthy of support according to the recently announced Florida Citizens, which will see the rest of the market guarantee that is above the FIGA indicators for those who are insolvent.
The Florida Office of Insurance Regulation (OIR) announced a plan last week to establish a temporary insurance plan through the Citizens Property Insurance Corporation to help lower-priced, but reliable, carriers.
We explained more about the plan with Citizens here, explaining that it is more of a guarantee, than a reinsurance, that provides a way for claims above the FIGA caps to be met, allowing carriers to remain in place even after they expire. download.
But, of course, the Citizens plan is Florida’s only plan and United (UPC) has policies that it has written at risk elsewhere in the United States.
Directing the carrier to explain, “UPC’s operations in Southeast Georgia, North Carolina and South Carolina are 100% owned by HCI Group, Inc. UPC’s business listed in New York is 100% owned by HCI Group, Inc. .and Interboro Insurance Company.
“Although UPC is maintaining these 100% shares, we do not know if this arrangement is valid for mortgages backed by Fannie Mae or Freddie Mac.”
The provision of Citizens, which continues to be called reinsurance although it is not, is the only law in Florida and there are carriers, such as United (UPC), who write business elsewhere and rely on their Demotech ratings.
Given that quota share reinsurance is a 100% system, it seems that the GSE loan will accept this, since a 100% reinsurance system will help carriers not to lose their ability to maintain policies issued against leased goods.
100% reinsurance contracts are considered one of the most important things for Fannie and Freddie, but the fact that United (UPC) has a policy outside of Florida raises another level of uncertainty about the whole issue and shows that the problems in the Florida property insurance market can easily end. affecting policyholders in other countries.
Of course, the quality of a 100% insurance provider would also be questionable, if the GSE needs to look into this.
Read all of our news and analysis of the Florida insurance and reinsurance market.