State Halts Another Insurer

A Leon County Circuit Court has ordered state regulators to take over the assets of Florida Select Insurance Co., a fate regulators say could befall other insurers. 
 
The action, taken Friday, was consented to by the insurer, which was not able to buy enough reinsurance, or insurance for insurance companies. 
 
Florida insurance regulators said Monday that they are taking reinsurance coverage seriously. 
 
"At this point, as we're already in hurricane season, if we find a company can't get reinsurance, we won't wait to act," said Bob Lotane, spokesman for the Florida Office of Insurance Regulation. 
 
Florida Select is the fourth company in recent months to go into rehabilitation, which is when regulators manage a company's assets so it can continue operating. The Florida Department of Financial Services was named the receiver in the rehabilitation. 
 
The reinsurance market has tightened this year, with companies facing prices that are two and three times higher than last year. Many insurers have struggled to get coverage. 
 
For that reason, Lotane said, the office is not optimistic about the chances of Florida Select's buying more reinsurance and staying in business. The company's 70,000 Florida policyholders should start looking for other insurance coverage, he said. 
 
"The fact that they've been unable to obtain reinsurance, coupled with the current reinsurance climate, would make it very difficult to achieve," he said. 
 
Florida Select did not return calls seeking comment Monday. The company is continuing to pay claims and write new and renewal policies. All of its existing policies remain in force. Customers with questions should contact Florida Select. 
 
The insurer, a subsidiary of Vesta Insurance Group Inc., is based in Birmingham, Ala., with offices in Sarasota. It has about 7,300 policies in Palm Beach County and the Treasure Coast. 
 
Several affiliated companies, also owned by Vesta, are in rehabilitation and under the control of the Texas Insurance Department. 
 
Florida Select is in "decent financial shape" with about $20 million in capital but has a lot of holes in its reinsurance coverage, Lotane said. 
 
According to its 2005 annual statement, the company reported net income of $528,425, down from $564,278 in 2004. 
 
Its surplus -- the money available to pay future claims -- rose to $19.7 million from $17.8 million. 
 
In March, A.M. Best, the rating agency, downgraded its financial strength rating for Vesta Insurance Group and its companies to CC+ (marginal) from B (fair). 
 
The rating agency was concerned about the companies' capital position and greater than expected losses from the 2005 hurricanes. 
 
Florida Select's predicament follows that of Tampa-based Poe Financial Group's three insurers. 
 
Those companies - Southern Family, Atlantic Preferred and Florida Preferred - did not have enough capital to satisfy regulators' requirements and could not buy enough reinsurance. 
 
The firms ultimately were liquidated, and their policies were transferred July 1 to Citizens Property Insurance Corp., the state-run insurer of last resort. 
 
Lotane said that, if a judge orders Florida Select to be liquidated, he would have the option of transferring all of the policies to Citizens. 
 
"I'm sure that soon there will be an announcement on how the policies will be transferred," he said. "Generally, these things are being handled so there's no lapse in coverage." 
 
The Miami Herald contributed to this story. 
 
- stephanie_horvath@pbpost.com 
 
Florida Select claims Q&A 
 
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