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Weston Insurance Becomes Fifth Florida Insurer to Go Insolvent This Year 2022

Weston Insurance Becomes Fifth Florida Insurer to Go Insolvent This Year 2022

Weston Insurance Becomes Fifth Florida Insurer to Go Insolvent This Year 2022

Weston Insurance Becomes Fifth Florida Insurer to Go Insolvent This Year 2022

State regulators have determined that Weston Property & Casualty Insurance Co. is insolvent and should be placed into receivership, making it the fifth Florida property insurer to be dissolved this year.

The 10-year-old Weston, who has around 22,000 policies in the state, “is insolvent or about to become insolvent,” according to a notification the Florida Office of Insurance Regulation sent to the Department of Financial Services on Tuesday. DFS should begin delinquency procedures.

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The filing was made one day after the Demotech financial rating firm announced that it had withdrawn the financial stability rating for the Coral Gables-based Weston. But the company’s board of directors on July 29 had already agreed to the receivership after more than $94 million net losses in the last two years and a spike in reinsurance costs, the OIR information showed.

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Weston Insurance Becomes Fifth Florida Insurer to Go Insolvent This Year 2022

The carrier also had shown on its books that it was including funds from an affiliate captive firm, a move that was never approved by OIR. Without the captive arrangement, Weston did not have enough surplus, the OIR’s referral letter to DFS explained.

Nixon (Linkedin)

Weston’s CEO is Deanne Nixon, who succeeded Michael Lyons in early 2021, according to company information. The firm did not mention the delinquency on its website Wednesday.

The OIR referral letter included an affidavit from Virginia Christy, the office’s director of property & casualty financial oversight, which detailed the financial ups and downs that Weston has been through:

  • In summer 2020, the OIR required Weston to file a capital management plan to improve its liquidity and reduce the millions of dollars in loans it owed to its managing general agent, Weston Insurance Management. About the same time, in July 2020, Hudson Structured Capital Management took a 50% stake in the company, Christy’s affidavit explained.
  • In December 2020, Weston requested that it be allowed to start cancelling more than 1,500 wind-only policies. The OIR approved a smaller number of early cancelations.

    Weston Insurance Becomes Fifth Florida Insurer to Go Insolvent This Year 2022

  • In December 2021, West Insurance Co. merged with Weston Specialty Insurance, a Texas-domiciled company. The merged firm redomesticated to Florida and was renamed Weston Property & Casualty. Its combined surplus was reported as $28 million, which included capital infusions of almost $50 million. “Despite the actions taken by Weston to reduce its unprofitable policies in force, revise its corporate structure, modify its reinsurance program, and increase paid-in capital, surplus … continued to deteriorate,” Christy said in the affidavit.
  • In June of this year, Weston said it could not complete its reinsurance program due to the cost and unavailability of a lower-layer reinsurance plan. The company participated in the Reinsurance to Assist Policyholders, or RAP program, a $2 billion fund created by the Florida Legislature in May as a type of hurricane reinsurance program for Florida carriers. That apparently made little difference.

Also in June, Weston suggested utilizing an affiliate to run the Weston Cell, a captive program. However, the insurer “suggested the siphoning off of monies from Weston Insurance Management,” to be repaid later with greater costs to the MGA, rather than fully committing to that plan. The OIR rejected the proposal.

 

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Then, OIR found that Weston had been using the captive cell monies as though the transfer had been authorized for months. The document stated that without the monies, Weston’s surplus would fall below the $15 million threshold demanded under Florida law.

Weston Insurance Becomes Fifth Florida Insurer to Go Insolvent This Year 2022

On July 27, OIR held a conference call with Weston leadership to discuss unwinding the captive arrangement. Company officials then revealed that the carrier also owed about $50 million in premium payments to reinsurers, which had not been included on its list of liabilities in its financial statement.

“The premium payments owed by Weston, but not recorded as a liability, would, when added to the liabilities reported on its … May 31, 2022 financial statement, exceed the amount Weston reported as assets,” Christy’s affidavit said.

During the July 27 conference call, Weston officials admitted he firm was insolvent. The insurer had stopped writing new business July 15 and had stopped renewals three days later.

The OIR filing did not indicate when liquidation proceedings will begin.


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IBEH C. JOE

Financial analyst, Entrepreneur, Blogger and Business model

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