Demotech, Inc. affirmed the ratings of previously under-pressure Florida primary insurance carrier Southern Fidelity Insurance Company, citing the investment made by Hudson Structured Capital Management Ltd. as a driver for its renewed confidence in the insurer.
As we explained recently, Southern Fidelity and its parent Capitol Preferred Insurance Company were said to be on the verge of becoming insolvent, with the regulator seen as likely to put them into receivership without positive action being seen.
Enter Hudson Structured Capital Management, the insurance, reinsurance and transportation focused investment manager, stepping in and seemingly saving the carrier by taking a majority ownership stake and providing a capital injection designed to help Southern Fidelity continue and expand its business.
Demotech assesses the strength and health of the Florida insurance marketplace on a regular basis, rating the insurers financial stability and applying criteria they have to meet.
In the case of Southern Fidelity, the move made by Hudson Structured has given Demotech renewed confidence in the carrier and the rating agency has affirmed its Financial Stability Rating® (FSR) of A, Exceptional.
“This affirmation is based upon Hudson Structured Capital Management Ltd., doing its re/insurance business as HSCM Bermuda, intention to take ownership of Southern Fidelity Insurance Company and its affiliated entities on or about November 12, 2020,” Demotech explained.
“Having reviewed and accepted Southern Fidelity’s vertical and horizontal catastrophe reinsurance program prior to the 2020 – 2021 storm season, Demotech knew that the Company could survive even the unprecedented number of storms that struck its Louisiana portfolio in 2020.
“However, as the dollar amount of capital necessary to replenish surplus increased, we knew management would turn to knowledgeable professionals for funding,” Joseph Petrelli, President, Demotech explained.
As well as a vote of confidence in the Southern Fidelity leadership and team, as it’s clear Demotech is confident in their ability to deliver now they have the capital resources required. This also shows the strong position of an ILS and reinsurance investment manager and the good standing in which Demotech holds Hudson Structured.