A Leon County circuit court Tuesday approved a petition to liquidate Jacksonville-based Sunshine State Insurance Co. after the firm failed to boost its financial reserves.
Sunshine State, which issued property and casualty policies in northeast and north-central Florida, will be taken over by the Florida Department of Financial Services. The state Monday filed the petition for liquidation after Sunshine State failed to meet requirements set out in March by the Florida Office of Insurance Regulation (OIR).
Policies will be transferred to United Property and Casualty Insurance, a St. Petersburg-based holding company that had planned to buy Sunshine State in May, said Harvey Bennett, OIR director of communications.
“That would work best for the policyholders because they won’t have to go out and look for their policies,” Bennett said. “It’ll be done for them and it will be as seamless as possible.”
Pending claims will be covered by the Florida Insurance Guarantee Association, said Corie Mathews, CEO of the Professional Insurance Agents of Florida. “The good news for policyholders is that in the immediate short term there is a backstop for them,” Mathews said.
The action came after Sunshine State’s technology platform and phone number were shut down Monday for nonpayment.
Sunshine State, founded in 1997, offered personal and casualty insurance, including homeowners, dwelling fire and federal insurance.
The company came under fire in late February when it informed the OIR that it would not be able to file its 2013 financial statements, due March 1, after it uncovered an accounting error in reinsurance contracts from 2008 to 2011. The cost of fixing the errors, combined with the company’s fourth quarter losses, would negatively affect its surplus, Sunshine State told the state.
The insurance company agreed to file its financial statements by March 26 and to increase capital or cut its surplus to the required $15 million by May 15. At that time, according to the agreement, Sunshine State would agree to cancel or transfer policies to another licensed insurer and give policyholders 45 days’ notice. Until the terms of the consent letter were fulfilled, Sunshine State agreed to discontinue writing new business and stop payments to its owner, U.S. Re, or its affiliates.
It also promised to continue honoring all claims on its Florida policies.
On May 15, United Property and Casualty announced it was entering into a nonbinding letter of intent to acquire Sunshine State. It also announced it would inject funds into Sunshine State to restore its financial rating and fulfill regulatory requirements. At the time, United issued a statement saying it expected to retain Sunshine State’s management and employees and maintain continuity in policy forms and rates.
But on May 28, United terminated its bid to acquire Sunshine State “based on a comprehensive due diligence investigation,” according to a letter filed with state insurance regulators.