Hudson Structured takes majority stake in Southern Fidelity

Hudson Structured Capital Management Ltd., which enters into insurance and reinsurance investment business as HSCM Bermuda, has taken a majority stake in under-pressure Florida primary insurance carrier Southern Fidelity Insurance Company.

As we explained last week, Southern Fidelity and its parent Capitol Preferred Insurance Company were on the verge of becoming insolvent, with the regulator said likely to put them into receivership as early as this week.

Enter Hudson Structured Capital Management, the insurance, reinsurance and transportation focused investment manager, which has stepped in and seemingly saved the carrier with a capital injection designed to help it continue and expand its business.

Hudson Structured said that it intends to take majority ownership of Southern Fidelity and its affiliated entities as soon as November 12th 2020.

In exchange for the majority stake, HSCM Bermuda will also provide Southern Fidelity with a capital injection and is set to take an active role in maintaining and expanding the carriers footprint in the Florida, Louisiana and South Carolina homeowners’ insurance markets.

”2020 has been a challenging year for the Southeast homeowners’ insurers,” Edouard von Herberstein, Partner and Chief Underwriting Officer – HSCM Bermuda explained. “As rates and the underwriting environment begin to improve, we are excited to support Southern Fidelity as they rebuild.”

“Southern Fidelity Insurance Company is proud to announce this new partnership with HSCM Bermuda. This alliance will strengthen Southern Fidelity’s position in the marketplace, and we look forward to continuing to serve our agents and policyholders,” added James Graganella, Chief Executive Officer of SFIC.

Hudson Structured is no stranger to stepping in to assist under pressure or struggling Florida primary insurance carriers, having done the same for Weston earlier this year.

The insurance, reinsurance and insurance-linked securities (ILS) investment manager recognises the opportunity to gain an increasingly significant origination-focused foothold in Florida with these carrier affiliations, as well as potentially profitable investment opportunities over-time.

Florida’s carriers have been beset by issues in recent years, ranging from hurricanes, through to litigation and a proliferation of claims inflation.

This has pressured their business models and made them untenable without additional capital in some cases.

Which provides an opportunity for those with capital, an understanding of coastal catastrophe risk and who can offer additional synergies in terms of reinsurance capital, to step into the Florida insurance market alongside these carriers and help them continue their businesses and expand into what are increasingly profitable market rate conditions.