FedNat Holding Co. incurred $29 million of estimated first-quarter net catastrophe losses, driven by 11 notable events, the Florida-based insurer revealed in a U.S. Securities and Exchange Commission filing, news sources reported April 28. The company doubts it can continue operations, reaching the conclusion in part because of continued underwriting losses in the first quarter of 2022, sources said, citing a separate Form 10-K filing. The first-quarter events generated claims in its home state, Texas, Louisiana and South Carolina. About $10 million of the losses are related to business the company is running off, including the Maison Insurance Co. book it acquired in December 2019 and FedNat’s non-Florida book, the company said. FedNat recorded about $2 million of net adverse reserve development related to Category 4 Hurricane Laura that made landfall in Louisiana in August 2020. The insurer has refocused on Florida homeowners, saying that the market improved in recent years. The company said the runoff that started in December should take 18 months to complete. All of FedNat’s companies recently entered into a consent order with the Florida Office of Insurance Regulation, and noted in the 10-K that it could be placed into receivership by the Florida Office of Insurance Regulation unless it acquires excess-of-loss reinsurance for coverage at the July 1 renewals. It anticipates increased OIR oversight because it acknowledged doubts about its ability to continue operations.
A judge ordered the liquidation of Lighthouse Excalibur Insurance Corp., April 28, shortly after the Louisiana Department of Insurance placed the homeowners carrier in receivership. Judge Richard “Chip” Moore of the 19th Judicial District Court in Baton Rouge signed the order which says further efforts to rehabilitate the company would be futile. The Lighthouse board of directors did not object to the order. Under the order, policies in Louisiana will remain in effect until their expiration or when the policyholder cancels. With the entry of the liquidation order, the Florida Insurance Guaranty Association was activated to pay outstanding Florida claims for property/casualty policies, it said. Lighthouse is the fourth insurance company the Louisiana Department has taken over in the wake of four storms. Lighthouse accounted for about 3.27 percent of the Louisiana homeowners insurance market, or 30,000 homeowners policies. The company was on a downward financial slide, having recorded a net loss of $7.6 million for 2020, subsequent to hurricanes Laura, Delta and Zeta. The 2020 loss is up from a net loss of $1.8 million for the same period a year earlier.
Corrie Bauckham Batts Ltd., a Lloyd’s wholesale insurance broker, entered liquidation on April 20, according to the U.K.’s Financial Conduct Authority. CBB specialized in non-marine business, which it placed into the London Market, much originating in the U.S. Having considered the firm’s financial position, the directors concluded that the firm is insolvent, and based on a shareholder vote, two insolvency practitioners from Menzies LLP were appointed, according to the FCA. The directors decided to place CBB in liquidation because of loss of income worsened by the Covid-19 pandemic and the subsequent cash flow insolvency, according to Menzies LLP. According to Menzies, officials initially thought the business and assets of CBB, including the client assets, would be sold to an unconnected third party, but the offer for the business and assets fell away in March. As business fell off, CBB entered voluntary requirements with the Financial Conduct Authority, which placed restrictions on CBB’s activities. The parties then decided CBB had no future trading prospects, leading to the liquidation proceeding. The company had been in business since 1980. Menzies said that funds CBB held in accounts for its clients have been pooled, and will be distributed after the liquidators’ reconciliation. Distribution costs will be assessed against the client money pool, leading to an anticipated shortfall of funds to clients, Menzies said. Given the extent of CBB’s client monies and the nature of its record keeping, Menzies said it anticipates a distribution will be made to clients on a pro-rata basis within three to four years of the liquidation date.
The Department of Insurance has promulgated Regulation 120 as published in the Louisiana Register on April 20, 2022. Regulation 120 establishes procedures and notice requirements applicable to administrative and agency proceedings instituted against a license. More specifically, the regulation prescribes the time delays for notices sent to a licensee, sets forth a mechanism for requesting a stay, and further addresses related procedures governing administrative actions against a license in accordance with the Louisiana Insurance Code.
Louisiana Department of Insurance Advisory Letter 2022-01 outlines the duties of and restrictions on public adjusters, such as limiting their authority in assisting insureds in first-party claims. In the advisory letter Insurance Commissioner Jim Donelon stated that public adjusters cannot issue contingency-based fee arrangements with policyholders, offer legal advice about policy provisions or coverage issues, or advise insureds about their rights concerning legal redress of wrongs under insurance policies, among other actions. Public adjusters are advised to review their websites for language that could be interpreted as unauthorized practicing of the law. In the meantime, several bills are moving through the legislature regarding public adjusters. Donelon earlier issued Directive 219 that tells authorized insurers and surplus lines insurers they are directed to comply with the Louisiana Insurance Code which grants insureds the right to hire public adjusters. Apparently, some insurers were attempting to prohibit the use of public adjusters by insureds in their policy provisions. Insurers were directed to review their policy forms and endorsements to ensure compliance.
According to a GlobalData survey, if Google began to offer end-to-end household insurance policies, it would pose the greatest threat to insurance companies based in the United Kingdom, Reinsurance News reported April 26. The survey of U.K. consumers found that over 25 percent of respondents would be interested in buying their home insurance from Google. Respondents also signaled they would be interested in policies from Amazon and energy companies. Ben Carey-Evans, senior insurance analyst at GlobalData, says, “In reality, it looks like these players will look to come in as partners for insurers and offer the technology to aid products. However, GlobalData found that if these companies did decide to offer end-to-end household products, a significant proportion of consumers would view them as viable providers, so the threat to incumbent insurers is there.”
In a letter to S&P Global Inc., the U.S. Department of Justice’s Antitrust Division warned that a proposed change in the ratings firm’s assessments of the creditworthiness of bonds owned by insurance companies could raise significant concerns under federal antitrust law, Bloomberg reported May 4. Antitrust Chief Jonathan Kanter said in the letter that S&P should carefully consider whether penalizing insurers that purchase securities rated by S&P’s competitors has the potential to raise barriers to entry and expansion by competitors, insulate S&P from competition, or otherwise suppress competition from rival rating agencies. In March, the National Association of Insurance Commissioners expressed concerns about the change in methodology.
The amount of debt that trades at distressed levels has doubled since the start of 2022, and investors are now backing away from these riskiest U.S. corporate bonds, the Financial Times reported May 3. According to a Financial Times analysis of an index run by Ice Data Services, the value of junk bonds trading for 70 cents on the dollar or less has jumped to $27 billion from about $14 billion at the end of 2021. This increase reflects a more hawkish Federal Reserve, which first raised interest rates in March and did so again May 4. UBS analyst Matt Mish said the number of companies facing higher borrowing costs increases sharply for bonds trading above an all-in yield of 10 percent, with over eight percent of the U.S. high-yield bond market now above this level.
IDA TO BE RETIRED
The World Meteorological Organization said April 26 that it will retire the name “Ida” from its list of Atlantic hurricane names that repeats every six years. Ida caused $75 billion in damage in the U.S. and killed 55 people in a swath of destruction from Louisiana to New England. Ida, a Category 4 storm, caused about $55 billion in flooding damage and killed six people in Louisiana when it made landfall, but its heavy rains and flooding killed 49 people in the Mid-Atlantic and Northeast. It is the fifth costliest storm in U.S. history behind Hurricanes Katrina, Harvey, Maria and Sandy, all also retired, said a National Hurricane Center senior hurricane specialist, who is on the WMO committee that retires names.
WORKERS’ COMP TOOL
An essential tool to identify the similarities and distinctions between workers’ compensation regulations and benefit levels in U.S. states and Canadian provinces as of Jan. 1, 2022, is available from WCRI and the International Association of Accident Boards and Commissions (IAIABC). New in this edition is information about regulations addressing presumption of causation, availability of hearings and legal proceedings virtually, and a retrospective review of the maximum weekly benefit amount for temporary total disability. These are some of the questions the study answers: Which states and provinces allow individual or group self-insurance? Which states cover mental stress claims, hearing loss, and cumulative trauma? How many jurisdictions allow the worker to receive temporary total disability and permanent partial disability benefits at the same time? How do the maximum and minimum payments for temporary and permanent total disability benefits vary and how have they changed over time? The study builds on the U.S. Department of Labor’s development of a standard set of tables to promote uniformity across states and consistency in reports from year to year. Although the USDOL suspended its production of these tables for budgetary reasons, the WCRI and the IAIABC agreed to work together to continue publishing this resource.