March 8, 2022

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Avatar Becomes Second Florida Insurer to Become Insolvent This Year

March 8, 2022

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Two weeks after St. Johns Insurance Co. was declared insolvent, Florida regulators have taken steps to begin liquidating Tampa-based Avatar Property & Casualty Insurance Co., making it the second carrier this year to falter and the sixth in the last 30 months.

The Florida Department of Financial Services on Friday, March 4, petitioned the Leon County Circuit Court to approve a consent order making DFS the receiver for Avatar “for purposes of liquidation.”

Avatar, launched in 2008, is a smaller insurer in Florida, with about 42,000 homeowner policies – about a quarter the size of St. Johns. But the insolvency is the latest blow for the Florida insurance market, which some industry leaders have said is in meltdown with more insolvencies likely this year.

Insurance executives said it’s unlikely that the Avatar liquidation will follow the same route as St. Johns, with all policies transferred to another carrier. The Florida Office of Insurance Regulation last week ruffled some feathers when it became known that Slide, a startup insurtech-turned-insurer, would assume 147,000 policies and unearned premiums from insolvent St. Johns, without other carriers having a chance to bid on the policies.

Avatar’s receivership may follow the more conventional path, with the state-run Citizens Property Insurance Corp. taking the book of business and other insurers making take-out offers in the next few months, one executive said.

The court has not yet approved the Avatar receivership and a transition plan had not been filed by Tuesday morning. But a letter from Insurance Commissioner David Altmaier to DFS, included in the petition to the court, notes: “While no insurer has expressed an interest in providing coverage to all of Avatar’s policyholders, several insurers have expressed an interest in potentially providing coverage to some of Avatar’s policyholders through direct solicitation by their appointed agents.”

The Avatar Board of Directors voted Feb. 28 to begin the delinquency proceedings, due to the company’s insolvency.

It became clear that Avatar was facing financial difficulties in mid-February, when the company announced it would stop writing new business in the state. The Demotech rating firm then withdrew its financial stability rating for Avatar.

Avatar and St. Johns are two of seven insurers in the last several weeks to suspend new business or to non-renew thousands of policies in Florida. Others have asked for double-digit rate increases. Industry insiders and CEOs have warned for months that Florida’s insurance market is in crisis, with most carriers seeing significant losses from hurricanes, roof claims and litigation expenses.

The latest insolvency will likely require the Florida Insurance Guaranty Association to cover Avatar’s outstanding claims. It’s unclear if that will result in another assessment by FIGA on member insurance companies. After the St. Johns liquidation, FIGA approved a 1.3% assessement on premium for carriers, an assessment that will be passed on to Florida policyholders.

Avatar’s president, Hidesh “John” Adhia declined to comment Tuesday.

TOPICS CARRIERS FLORIDA