Florida regulators have taken over an insolvent domestic residential property insurer, but a deal is in the works for another private company to assume the insurer’s 37,000 policies.

A Leon County Circuit Court judge issued an order earlier this week clearing the way for the state Department of Financial Services to take over Sunshine State Insurance Co.

In issuing the liquidation order, the judge cleared the way for United Property & Casualty Insurance Co. (UPC), which had looked into buying the insurer but pulled out of those talks, to assume Sunshine State’s existing policies.

Sunshine State’s financial woes became apparent in February when the insurer first reported to regulators that it would fail to meet a March 1 deadline to file its 2013 annual financial statement. Sunshine State reported that it had discovered an accounting error related to its 2008 and 2011 catastrophic reinsurance treaties. The cost of fixing those errors, plus an operation loss in the fourth quarter of 2013, forced the company officials to tell state regulators that it could no longer meet the state’s surplus requirements.

Insurance Commissioner Kevin McCarty then ordered Sunshine State to either increase its surplus by $15 million or be acquired or recapitalized by another company along with a good faith deposit as of May 15.

McCarty further ordered that if Sunshine State could not meet the May deadline, the insurer would be required to transfer its policies to another insurer or provide a 45-day written cancellation notice to its 37,684 policyholders.

United Insurance Holdings Corp., parent of UPC,  expressed an interest in purchasing Sunshine State in a letter of intent on May 15, the date regulators set for Sunshine State to either increase its surplus by $15 million or find a buyer.

However, a few weeks later, UPC President John Forney, in a letter to regulators, said that after a further review of Sunshine State it would no longer keep that commitment.

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http://www.insurancejournal.com/news/southeast/2014/06/04/331022.htm