Having had its rating withdrawn recently, Florida focused property insurance carrier Weston Property & Casualty Company is now heading for insolvency, after the regulator initiated delinquency proceedings against it.
Weston, the property insurer that insurance-linked securities (ILS), reinsurance and transportation investment manager Hudson Structured Capital Management (investing as HSCM Bermuda) has a majority stake in, lost its rating earlier this week after Demotech withdrew it and downgraded the carrier to NR (not rated).
That didn’t necessarily mean a fatal blow, as Weston Insurance could have been eligible to make use of the new guarantee type reinsurance agreement with Florida Citizens.
But it seems in this case there are other reasons for the regulators decision and Weston looks set to struggle to make a comeback at this stage.
David Altmaier, Commissioner in the Florida Office of Insurance Regulation, wrote that his office had determined to start delinquency proceedings against Weston, as the insurer has been deemed impaired or insolvent, and laid out all the reasons why.
The affidavit suggests the regulator has had concerns over Weston’s financials for some time, since as early as 2020.
Weston’s losses for 2021 came out significantly higher than its surplus, and Weston had also struggled to place its reinsurance at the recent June renewals.
That’s despite the fact Weston had ventured to the catastrophe bond market in 2022 to secure additional reinsurance coverage, with a successful $45 million Marlin Re Ltd. (Series 2022-1) issuance.
That wasn’t sufficient and the affidavit details that lower layers of reinsurance Weston needed could not be filled and while it participated in the new Florida RAP reinsurance arrangement, that also hasn’t helped.
With somewhere around 20,000 policies in Florida, should Weston go into receivership that will be additional policies that flow to residual market insurer Citizens and Weston will be the fifth carrier to go insolvent in Florida this year.
It seems Weston has not been deemed eligible for the new Citizens scheme to guarantee claims above the FIGA caps, to support its ability to recover, so far and given the comments in the affidavit that also seems unlikely at this time.
There will be an impact to Hudson Structured’s position in the company, although we suspect the valuation of its stake in Weston will already have been marked-down given the carriers struggles in recent years.