The Florida Office of Insurance Regulation (FLOIR) has asked for delinquency proceedings to be initiated against American Capital Assurance Corp (AmCap), with the regulator deeming the insurer insolvent.

AmCap and FLOIR

Florida insurance commissioner David Altmaier has written to the state’s CFO, Jimmy Patronis, stating that FLOIR “has determined that one or more ground exist for the initiation of delinquency proceedings, pursuant to Chapter 631” of Florida’s statutes. 

In the letter, dated 2 April, Altmaier advised that delinquency proceedings be initiated.

Altmaier included a consent to order of receivership signed by AmCap executives that stated the insurer “admits that it is presently unable to pay its debts as they become due in the usual course of business and therefore as of the date of this consent is insolvent”.

Rehabilitation under Chapter 631 of Florida’s statutes is a mechanism that can be used to remedy an insurer’s problems, resolve its liabilities in order to avoid liquidation or prepare it for liquidation. The receiver is provided with “great discretion” to prepare a plan to assist an insurer in resolving its financial and/or other difficulties, according to Florida’s Division of Rehabilitation and Liquidation. 

AmCap lost around two thirds of its surplus last year on the back of multiple severe weather losses.

As this publication has reported, the insurer was understood to have paused writing new business in the aftermath of AM Best downgrading its financial strength rating from A- to C and its credit ratings from “a-” to “ccc+” in early March. At the same time Demotech withdrew its rating on the St Petersburg, Florida-based carrier. 

On 25 March, AM Best further downgraded AmCap’s financial strength rating to D and credit rating to “c”, ahead of withdrawing them at the insurer’s request.

Despite the ratings being withdrawn, Florida sources had told this publication at the time of AM Best’s rating withdrawals that discussions with FLOIR were ongoing as AmCap looks for a way forward. Willis Re has been working with AmCap and several interested parties.

Sources said one option could see AmCap pivot its portfolio towards the E&S market, where freedom of rate and form would allow it to rapidly address some of the challenges that were impacting its portfolio in Florida before last year’s spate of losses outside its home state.

AmCap had been profitable in 2016 and 2017, but fell to operating losses of $6.0mn and $7.0mn in the next two years before a dramatic deterioration in 2020 to a deficit of $43.6mn.

The insurer’s combined ratio deteriorated from 77.5 percent in 2016 and 99.1 percent in 2017, to 115.3 percent in 2018 and 114.4 percent in 2019.

Last year’s heavy loss tally sent the combined ratio soaring to 354.3 percent, according to statutory data compiled by S&P Global.

The previous Florida property casualty insurer to enter receivership was Windhaven in 2019. The insurer, which was a major cedant of Greenlight Re, moved into liquidation in January 2020.