United Insurance Holdings Corp. (UPC Insurance), the Florida-headquartered property and casualty (P&C) insurer, has officially ceased writing new homeowners business in the state, as of January 1st, 2022.
In a memo sent to agents, seen by Reinsurance News, the company cited high catastrophe losses from the 2020 storm season, rising reinsurance rates, and growing litigation costs as reasons for suspending new business.
The move is the latest in a series of worrying signs for the troubled Florida market, which has recently seen similar exits from insurers such as Progressive and TypTap.
United Property & Casualty Insurance Company (UPCIC) remains one of the largest homeowners in Florida, but the business has taken steps to diversify out of the state in recent years.
As such, it was only writing around 31% of total direct premiums in its home market as of December 2020, with states such as Louisiana, South Carolina, and Texas becoming new areas of focus for the company.
This geographic shift comes in response to six consecutive years of growing underwriting and operating losses for UPCIC.
ALIRT Insurance Research, which analyses the relative financial performance of insurers, tellingly reduced its score for UPCIC from 46 out of 100 in 2015 to just 18 as of September 2021.
In addition to the company’s string of losses, analysts cited weak risk-adjusted capitalization, aggressive gross and net premium leverage, elevated reinsurance recoverable balances, declining net premium volume, and subpar investment returns.
ALIRT also noted that UPCIC received $96 million in capital contributions from 2016-2019, which helped to offset the company’s sizeable losses and keep surplus relatively stable, though UPCIC’s surplus has now fallen 45% from a high mark of $172 million in 2018 due to widening underwriting and operating losses as well as a lack of substantial capital infusions.
“Following the unprecedented 2020 storm season, the significant increase in reinsurance cost, and the worsening litigation trends within many of our markets, UPC has made the difficult decision to suspend new business with effective dates of January 1, 2022 and later,” UPC stated in its memo.
It went on to explain that the suspension would apply to new business for HO-3, homeowners, HO-6, condominiums, and DP-3, dwelling fire for rental or non-owner-occupied properties.
Clarifying its reasoning for ending new homeowners business in Florida, UPC explained that the trend of escalating costs from weather claims in the state looks set to continue indefinitely.
“There has been a material shift in late claim reporting patterns stemming from weather events in the last six years,” the company stated. “As such, we believe the more recent experience best represents what we expect to occur moving forward.”