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United (UPC) the first downgraded Florida carrier eligible for Citizens guarantee


United Property & Casualty Insurance Company (UPC), a carrier of the United Insurance Holdings Corp. group, has become the first downgraded carrier in Florida to become eligible for support via the Citizens guarantee arrangement.

florida-insurance-marketThe Florida Office of Insurance Regulation (OIR) announced a plan last week to launch a temporary reinsurance arrangement through Citizens Property Insurance Corporation to support any downgraded, but still viable carriers.

We reported more details on that arrangement with Citizens here, explaining that it is more of a guarantee arrangement, than reinsurance, that provides a way for claims above FIGA caps to be covered, to allow a carriers policies to remain in-force even after its downgrade.

Demotech downgraded United Property & Casualty Insurance Company two notches to “M” this week, putting the carrier at-risk.

The challenge being that a carrier with a Demotech rating lower than ‘A’ may not be able to write, or hold, policies for mortgaged properties.

Hence, the back-stop that uses Citizens as a guarantee to pay claims above the statutory FIGA caps has been put in place, as an exception that Fannie and Freddie would allow and to prevent more Florida carriers failing and their policies having to be assumed by residual market insurer Citizens.

The Florida Office of Insurance Regulation (OIR) has reported that United Property & Casualty Insurance Company (UPC) is the first carrier to be eligible for the arrangement with Citizens.

This should help to avoid the challenging scenario that UPC’s more than 185,000 policies, as of March 31st, have to flow to Citizens own portfolio.

So Citizens would now pay claims, above the Florida Insurance Guaranty Association (FIGA) policy caps, should UPC go insolvent and require that support.

At this stage, we don’t know whether the insurers that had their ratings withdrawn, FedNat and Weston, will also be deemed eligible for this additional support.

As we explained before, it is only insurance carriers deemed viable that will be able to qualify for the Citizens-backed guarantee/reinsurance type arrangement.

Read all of our news and analysis on the Florida insurance and reinsurance market.

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