Florida-based American Capital Assurance Corp. is officially in receivership and is in the process of being liquidated after being deemed insolvent by Florida’s insurance regulator earlier this month.
The Florida Department of Financial Services, which serves as the receiver for any insurer placed into receivership in Florida, said it was granted a consent order for purposes of liquidation, injunction and notice of automatic stay of AmCap on April 14 by the Second Judicial Court in Leon County, Florida.
According to DFS, under the receivership order, all insurance policies issued by AmCap in effect at the time of the court’s order will be cancelled as of 12:01 am on Friday, May 14, 2021, except for the insurer’s flood policies. Policies with normal expiration dates prior to May 14, or policies which are terminated by the insured or cancelled for non-payment of premium will be cancelled as of their earlier date.
DFS is authorized under Florida law to conduct an investigation to determine the causes of the insolvency, the court order states, including whether false statements filed with DFS contributed to the insolvency and if any laws in Florida, any other state or the federal government relating to the solvency of the insurer were violated. DFS also has the authority to discover assets for recovery and to determine the location of assets and their manner of recovery.
AmCap wrote commercial multi-peril and allied coverage lines in Florida, Georgia, Louisiana, North Carolina, South Carolina and Texas. The company had approximately 2,300 in force policies in Florida at the time its insolvency was declared.
Policyholders are being notified of the receivership and are advised on DFS’ Rehabilitation and Liquidation website to work with their agents, who have also been notified of policy cancellations, on finding a new insurer.
A notice was sent to all AmCap agents regarding the liquidation on April 15.
“As an agent of record, you are advised that the liquidation order significantly affects the company’s policyholders and may legally impose certain obligations on you,” the DFS notice states. “The department expects you to contact your policyholder clients and assist them with any questions they may have regarding the receivership proceeding.”
Under Florida law, AmCap agents in the state are required to provide a written notice of the receivership by registered or certified mail, or by email with deliver receipt required, to the last known address of policyholders whose policy has not been replaced or reinsured with a solvent insurer.
DFS said agents should inform policyholders that:
- With the exception of the flood insurance coverage issued by AmCap, the company’s insurance policies are cancelled effective May 14, 2021, unless otherwise terminated prior to that date.
- The deadline for filing claims in the AmCap receivership proceeding is October 14, 2021.
The agent notice further states that all premiums and unearned commissions collected by agents or brokers on behalf of AmCap must be accounted for and paid directly to the department within 30 days.
“No agent, broker, premium finance company or other person may use premium monies owed to AmCap for refund of unearned premium or for any purpose other than payment to the department,” the notice says.
DFS said there is a process in place for payment of covered claims incurred before May 14, 2021 and each state’s insurance guaranty association has been activated to help pay outstanding claims for AmCap policies and unearned premium. The processing and payment of pending covered claims will be made by the applicable state insurance guaranty association; info for reaching each association is available on the DFS site.
AmCap was deemed insolvent by the Florida Office of Insurance Regulation April 2 after the regulator found that grounds existed for the “initiation of delinquency proceedings.” A consent to order of receivership signed by AmCap “in which it admits that is insolvent,” was submitted to DFS by OIR.
The order came after AmCap’s rating was downgraded by AM Best and withdrawn by Demotech in early March at the company’s request when it was notified it would be downgraded.
“We advised AmCap we would no longer support an FSR at the A level and offered them an FSR of M or withdrawal,” Demotech Founder and President Joseph Petrelli told Insurance Journal at the time. “AmCap then opted to be not rated rather than rated M [moderate].”
Best also placed AmCap’s credit ratings under review with negative implications. Best further downgraded the company to D (Poor) on March 25 and withdrew its ratings as the company requested then to no longer participate in Best’s rating process.
Best assessed AmCap’s balance sheet strength as “very weak, as well as its marginal operating performance, limited business profile and marginal enterprise risk management,” in early March when it first downgraded the company. It noted then the rating actions were a result of net underwriting losses from multiple severe weather events in the second half of 2020, particularly in Louisiana, which led to significant surplus loss and a severe negative impact to AmCap risk-adjusted capitalization on a standard and catastrophe-stressed basis, as measured by Best’s Capital Adequacy Ratio (BCAR).
“These diminished operating results are also indicative of product and geographic concentration concerns in the commercial property insurance book of business in Florida, Texas and Louisiana, calling into question the soundness and fundamentals of [AmCap’s] enterprise risk management program,” Best said.
At that time and in its March 25 announcement, Best said AmCap management had communicated near-term strategic initiatives that are designed to “immediately improve risk-adjusted capitalization and stabilize operating results.”
Representatives for AmCap previously did not respond to requests for comment but the company touted 2020 as a “pivotal year” on its website, saying it “strengthened us and transformed how we service our agent partners and their policyholders.”
AmCap expanded into North Carolina and Georgia last year with residential and non-residential coverage offerings. It covered more than 30,000 buildings across the six states it operated in for a total of $38 billion in total insured value and $110 million premium in-force, the company’s website states. It also noted it experienced a 120% year-over-year increase in flood insurance, specifically its residential condominium building association policy.
The company had a total of 55 employees and more than 450 appointed agents.
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