Reinsurance News

FedNat completes $15m investment in Monarch, transfers policies over

6th July 2022 - Author: Pete Carvill

FedNat has completed its £15m investment in Monarch as the Florida Office of Insurance regulation authorised the assumption of 78,000 policies between the two firms.

fednat-logoThe investment was made through funds managed by Hale Group.  With the closing of the transaction, the Hale Group is now majority owner of Monarch, with FedNat holding a minority interest and maintaining representation on Monarch’s board.

FedNat Underwriters, a subsidiary of FedNat, will continue to undertake policy servicing and claims administration with respect to the policies transferred to Monarch.

Michael H. Braun, CEO of FedNat, said, “FedNat has materially exited non-Florida markets and expects to complete our transition in coming months as we continue to refocus solely on our historical market in Florida, which we believe will result in a financially stronger company, with less volatility, that will be rightsized to our current capital and surplus position.”

FNIC’s other remaining Florida policies were cancelled effective June 29, 2022. FNIC’s non-Florida policies have been cancelled, expired or assumed at this time. The Florida policies of Maison Insurance Company (Maison), which is currently in run off, were cancelled effective June 29, 2022, and most Maison’s non-Florida policies have been cancelled or expired, with the exception of approximately 7,650 Texas policies that will expire over the next nine months.

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This deal has been in the works for some months, as reported here by Reinsurance News.

FedNat CEO Michael Braun confirmed in May that his company would seek to become “much smaller, with significantly fewer policies in force,” ahead of the mid-year renewals, due to expected difficulties in securing affordable reinsurance coverage.

The difficulties come as a result of the downgrading of FedNat’s financial stability ratings (FSR) from an ‘A’ to ‘S’ by rating agency Demotech, which means the insurers’ policies will no longer be deemed acceptable by Fannie Mae and Freddie Mac for mortgage insurance.

FedNat saw further difficulties days after the deal was first reported here when Ronald A. Jordan, CFO of the firm, announced his resignation.

That was the latest in a series of travails for the firm. A filing from the FedNat Holding Company announced that he has handed in his resignation, effective June 10th, 2022. The filing states the resignation was done on May 12.

Erick A. Fernandez, the chief accounting officer at FedNat, stepped in to serve in Jordan’s role on an interim basis.

As our sister site reported at the time, the firm was aiming to reduce its scale and refocus its business on Florida, with a significant cancellation of Florida property insurance policies requested and potential sale and recapitalisation of its carrier Monarch as well, with new money set to come into the company.

This was to help the company secure its necessary reinsurance for the 2022 hurricane season, as it sought to downsize exposure, while recapitalising to win back its ratings and position the company more profitably on a go-forward basis.

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