Florida based primary insurer FedNat along with its carriers, FedNat Insurance Company (FNIC), Maison Insurance Company (MIC) and Monarch National Insurance Company (MNIC) has entered into a consent order with the Florida Office of Insurance Regulation (OIR).
In accordance to the order, FedNat and its carriers have agreed to file with the OIR by April 29, 2022, a plan to demonstrate the company’s ability to secure and maintain a financial strength rating acceptable to the secondary mortgage market.
The plan also involves the company being able to acquire sufficient reinsurance as of its July 1, 2022 renewal, support its existing business via the securing of additional capital, and address its non-Florida losses and policies.
Subject to regulatory approvals, with respect to reducing its books of business, the company’s plans may include the potential acceleration of the exit of non-Florida states, along with exploring a reduction in its existing policies within Florida.
Recently it was announced that FedNat had lost its ‘A’ rating as Demotech downgraded its Financial Stability Ratings (FSR) to ‘S’ (Substantial), putting the carrier at-risk of its policies not being allowed for mortgaged homes.
However, the FSR of MNIC remains at ‘A’ (Exceptional).
The downgrade, among other things may cause the company’s products to be unacceptable to mortgage lenders and prevent agents from selling and servicing FNIC products, and impact the company’s ability to obtain reinsurance.
As a result of these and other factors, FedNat currently anticipates that it will report in its annual report on form 10k for the year ended December 31, 2021, the company’s determination that there is substantial doubt regarding its ability to continue as a going concern under generally accepted accounting principles (GAAP).
In addition, FedNat continues to explore strategic alternatives in an effort to increase its capital resources to support its insurance carriers in the interest of policyholders and preserve value for the company’s stakeholders.
Furthermore, it has been stated that FedNat did not assume the successful execution of such strategies and action plans, because they are not fully within the company’s control, in assessing its ability to continue as a going concern.
