Florida Auto Insurer Windhaven Placed Into Rehabilitation

The future of another Florida domestic insurer is now in the hands of state regulators.

Non-standard private passenger auto insurer Windhaven Insurance Co. (WIC), based in Miami, has been placed into rehabilitation by a Florida court and the Florida Department of Financial Services has been appointed as the receiver.

WIC notified its agents of the news last week in an email obtained by Insurance Journal. A request for comment to the company was not immediately returned.

The insurer, which became licensed in Florida in 2005 as a domestic insurer to write private passenger auto liability and private passenger auto physical damage lines of business, has about 73,000 active policies in the state. WIC is the carrier for its Windhaven, Icon, Select and Optimum auto insurance programs.

Those policies will remain in force unless cancelled for non-payment of premiums or the already established policy expiration date. WIC is not writing new policies and is issuing non-renewal notices for existing policies. WIC notified its agents that during the rehabilitation proceedings, all policyholder claims are expected to be paid in full in the ordinary course and policyholders should be assured that their claims and coverage are not in jeopardy.

“We do not expect policies will be terminated by the company, but if they eventually are, policyholders will get ample notice. We fully support the measure taken since it will not impact our policyholders or cause a major ‘market disruption’ where there are a lot of policyholders that suddenly have no auto insurance coverage,” the email to agents states. “That would also put a big strain on our important agent partners and friends. In ‘Rehabilitation’ proceedings, the DFS will control WIC and will be responsible for all decisions related to WIC.”

Windhaven’s other insurance entities, including homeowners insurer The Hearth Group or Windhaven National insurance Group, which administers its Florida Windward program, will not be controlled by DFS and the rehabilitation does not apply to any of its other companies.

The order of receivership by the Second Judicial Circuit Court in Leon County comes less than a month after the Florida Office of Insurance Regulation placed the company under administrative supervision.

In a Dec. 9 petition, DFS said the basis for rehabilitation is that WIC ‘s surplus is considered impaired and does not meet the minimum surplus of $4 million or 10% of WIC’s total liabilities, as required by Florida law.

According to the court documents, WIC reported a $26 million policyholder surplus on its Sept. 30, 2019 monthly statement, but on Nov. 13 it notified OIR that a contingent commission liability of $19.1 million was realized but had not been reported on the September financial statement, thus reducing its surplus by the commission liability amount. WIC also notified OIR that its reserves were deficient by $7 million.

The court documents also state WIC is insolvent because all of its assets would not be sufficient to discharge all of its liabilities or that it is unable to pay its debts. WIC’s reported total liability as of Sept. 30 was more than $131 million and its total assets were $157.5 million. After the adjustment for the contingent commission and reserve deficiency, OIR determined WIC’s assets are not sufficient.

WIC has also suffered a decline in policyholder surplus of 22.8% — or nearly $11 million, between 2017 and 2018 and suffered a $9.7 million net loss for 2018, which represents nearly 20% of its 2017 year-end surplus in regards to policyholders, making its further transaction of insurance hazardous to policyholders, creditors, stockholders or the public, the court documents state.

According to the affidavit, WIC’s 2018 annual statement also shows a “pattern of adverse loss reserve development which reflects that [it] has been consistently under-estimating its actual losses and failing to establish adequate reserves for such losses.”

WIC’s condition appears to have worsened in 2019, with its invested assets declining from $74.2 million in the first months of 2019 to $41 million – a 44.6% decrease.

WIC consented to being placed into receivership after OIR determined it failed to comply with provisions of the Nov. 18 supervision consent order. According to the court documents, WIC was required to provide OIR with a bank statement reflecting a capital contribution of at least $30 million in cash or cash equivalents by Nov. 29 and did not do so.

“‘Rehabilitation’ proceedings provide a safe landing spot for WIC and its policyholders while we and the DFS continue to assess and address WIC’s financial challenges,” the email to agents stated. “…We are going to be working very closely with the DFS in the coming days. We are also working on other possible partnerships for Windhaven, Icon, Select and Optimum auto policies to continue to ‘live’ with us, to minimize disruption and provide a competitive marketplace in Florida for insureds and your business.”

WIC also began slowing down its business in the last few weeks; it first stopped writing new business for Windhaven, Icon, Select and Optimum. And then most recently it began the non-renewal of Windhaven, Icon, Select and Optimum policies – with communication going to policyholders at day 47 before their policy renewal/expiration date.

These policies will remain in place but will non-renew and policyholders will be notified 47 days before the policy renewal/expiration date.

All Windhaven, Icon, Select and Optimum policies are now available to agents through the company’s online portal insurestation.com.

WIC asked agents communicate to policyholders that during the rehabilitation proceedings all policyholder claims will be paid in full and coverage will continue in the ordinary course. It also stated there are not immediate steps for agents to currently take, and WIC will be in communication with agents as the process progresses.

“We will strive to keep you as up-to-speed as possible as we work with the DFS to find solutions to WIC’s financial challenges,” WIC said.

DFS is the entity that handles receiverships for all insurers in the state of Florida. In the case of rehabilitation, a DFS receiver prepares a plan to assist an insurer in resolving its financial and/or other difficulties. The receiver is responsible for taking actions necessary to correct the conditions that necessitated the receivership and, when possible, returning the insurer to the marketplace. It is also authorized to conduct all business of the insurer and manage or take property of its assets. If the insurer cannot be rehabilitated, DFS petitions for the court to place the insurer into liquidation.

Most recently, Florida homeowner insurer Florida Specialty Insurance Co. was placed into liquidation after it was determined it was insolvent and regulators were unable to establish a viable business plan for the company to move forward.