FedNat has until Friday to submit improvement plan, says Florida OIR

The Florida Office of Insurance Regulation has given FedNat Insurance a week to come up with a plan to improve its financial position, after the company’s stability rating was downgraded to a level not recognized by the secondary mortgage market. .

In a consent order signed Friday by Insurance Commissioner David Altmaier and executives from FedNat and its sister companies, the companies must present a strategic plan to acquire additional capital, improve FedNat’s rating and obtain sufficient reinsurance before the date of July 1 renewal.

On April 14, rating firm Demotech downgraded FedNat’s stability rating from “A exceptional” to “S substantial,” citing heavy losses after storms hit Texas and Louisiana in 2021. The rating indicates the airline continues to have substantial resources and is not in imminent danger. danger of collapse, said the president of Demotech.

But an “S” rating is not recognized by Fannie Mae and Freddie Mac, the government-sponsored home mortgage buyers.

“If FedNat policies are no longer acceptable to the secondary mortgage market, at the time of renewal, the lender may require policyholders to obtain replacement insurance coverage,” the OIR consent order explained. .

The order noted that FedNat is a national property and casualty insurer in Florida, along with its sister company, Monarch National. Another company owned by FedNat Holding Co., Maison Insurance Co., is a foreign insurer, domiciled in Louisiana. OIR said that while FedNat’s rating was downgraded, Monarch’s “A” rating remained the same and Demotech does not rate Maison.

Together, the three had 152,000 policies in force in Florida at the end of March and about 96,000 policies, mostly for homeowners, in Alabama, Louisiana, South Carolina, Texas and Mississippi.

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FedNat has until Friday to submit improvement plan, says Florida OIR altmaier david

The consent order did not explain why Monarch and Maison were included in the directive. Publicly traded FedNat Holding Co., which reported a $103 million loss for 2021, has already announced several steps to improve its bottom line, including pulling out of Louisiana and Texas and winding up its Maison operations.

The underpinning of its capital investments is also in the works.

“The companies and FedNat Holding Co. have stated that they are in active negotiations with multiple parties regarding potential additional capital agreements and the implementation of a strategic reorganization plan designed to provide long-term stability,” the consent order says.

Companies have until Friday, April 29 at 5 pm ET to submit the plan. It must include projections for the next 30 months, a cash flow analysis and a catastrophe reinsurance program. FedNat has waived its right to a hearing on the matter, OIR said.

The order was signed by Michael Braun, president of FedNat and Monarch, and Maison treasurer Erick Fernandez. They could not be reached for comment Monday morning. FedNat is based in Sunrise, near Fort Lauderdale.

FedNat Holding’s share price has fallen steadily over the past month, from $1.39 a share on March 24 to just 53 cents on Monday, April 25, according to Yahoo Finance and other market-tracking sites.


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