On June 15, 2022 Southern Fidelity Insurance Company ("Southern Fidelity") was ordered liquidated by the Second Judicial Circuit Court in Leon County, Florida. The Florida Department of Financial Services ("Department") is the court appointed Receiver of Southern Fidelity. A copy of the liquidation order for Southern Fidelity is available on the Department's website, www.myfloridacfo.com/division/receiver.
With the entry of the liquidation order, the Florida Insurance Guaranty Association (“FIGA”) was activated to respond to and oversee the liquidation proceedings of Southern Fidelity.
Southern Fidelity offered insurance policies for homeowners, condo unit owners, and renters insurance policies throughout a handful of southeast states including Florida, Mississippi, Louisiana, and South Carolina. At the end of 2021 Southern Fidelity reported having 98,000 policyholders on their books. This number was said to have fallen to around 79,000 in-force policies at the end of May.
How did Southern Fidelity Get Here?
Southern Fidelity’s troubles are not new. Only 2 weeks ago Southern Fidelity lost the Financial Stability Rating assigned by Demotech, Inc – a well known leader in rating regional insurance carriers in the southeast. However, Southern Fidelity’s issues date back to as early as February of 2019 when Southern Fidelity Insurance Company merged with Capitol Preferred Insurance Company.
Then, in February of 2020 after continued poor operating results, the failure of Capitol Preferred to make rate filings with the Florida Office of Insurance Regulation “OIR” created concerns. The OIR then asked the companies to file monthly statement and estimates of capital needed to survive.
In May of 2020, Capitol Preferred asked to be allowed to drop 23,800 of Southern Fidelity’s policies. Three months later, CPIC and Southern Oak asked for a rate increase in hopes of getting out of the red. In this plan, the companies requested approval to merge Capitol Preferred back into Southern Fidelity. The OIR approved the plan in September of 2020. Later that month, Southern Fidelity reported a surplus just above the minimum required. As a result of this report, the OIR placed Southern Fidelity under “confidential administrative supervision” because the report indicated that the company was at risk of impairment or insolvency if an immediate capital infusion was not made.
In November of 2020, Southern Fidelity was acquired by Gulf & Atlantic Insurance Company, which was owned by Hudson Structured Capital Management. Southern Fidelity said it planned to cancel ot non-renew around 40,000 policies within 4 months.
In late 2021 and early 2022, Southern Fidelity gave notice of a rate increase of 84% for homeowners policies and 111% for dwelling fire policies (policies intended for rental homes occupied by someone other than the property owner). By then, Hudson Structured Capital had provided $200 million in capital infusions to the company.
When Demotech withdrew the company’s financial rating, that was the last nail in the coffin.
What to know if you are a Southern Fidelity policyholder
If you are currently a Southern Fidelity Insurance Company Policyholder, make note of the following:
Southern Fidelity's insurance policies are cancelled effective 12:01 a.m. on July 15, 2022, unless otherwise terminated prior to that date.
Your current agent was made aware of the liquidation on June 16, 2022 and they were instructed by the Florida Department of Financial Services to work hard to find replacement coverage for you in the private market.
If your agent cannot find replacement coverage for you in the private market, Citizens Property Insurance Company ("Citizens") may be able to provide you with an offer of coverage. Because of hurricane season and the short time between the liquidation of Southern Fidelity and the policy cancellation date, Citizens is working to make this easier. Citizens is prepared to relax their underwriting guidelines for Southern Fidelity policyholders by allowing the deferral of 4 Point, Roof Certification and Wind Loss Mitigation inspections for up to 1 year. Additionally, a quarterly payment plan is available, which will allow the policyholder to initiate coverage with a 40% down payment while they await to receive any unearned premium due from the Florida Insurance Guaranty Association.
The Florida Insurance Guaranty Association ("FIGA") is designed to offer protections for policyholders insured by an insolvent insurer who is/was authorized and admitted by the Florida Department of Financial Services prior to insolvency. FIGA will help pay outstanding claims for Southern Fidelity policies as well as issue unearned premium refunds to policyholders who have pre-paid portions of their insurance premiums.
The processing and payment of pending covered claims will be made by FIGA (subject to the lesser of policy limits or FIGA's maximum cap). The maximum amount FIGA will cover is $300,000, with special limits applying to (1) damages to structure and contents on homeowners' claims and (2) condominium and homeowners' association claims. For damages to structure and contents on homeowners' claims, the FIGA cap is an additional $200,000. For condominium and homeowners' association claims the cap will be $100,000 multiplied by the number of units in the association. No claim will be paid more than this cap. All claims are subject to a $100 statutory deductible over and above any deductible identified in the Southern Fidelity policy. FIGA will not pay any claims occurring after the cancellation of your policy.
FIGA will pay covered unearned premium claims after the Florida Department of Financial Services completes its processing of the policy records and sends the unearned premium records to FIGA.
If you have further questions regarding the insolvency of Southern Fidelity Insurance Company, please refer to the numbers posted below and reach out to the appropriate department for assistance:
Southern Fidelity Customer Service: 1-866-874-7342
Florida Department of Financial Services: 1-800-882-3054 OR 1-850-413-3081
Citizens Property Insurance Corporation: 1-888-685-1555
Current clients of Evolve Insurance Agency: 941-244-2760
This is never good news for a Florida resident to hear right in the middle of Hurricane Season. Fortunately our agency is prepared and can offer you a quote to replace your current coverage issued by Southern Fidelity Insurance Company. Our agency has relationships with multiple admitted and authorized insurance carriers who are financially stable and ready to provide you with the peace of mind you need and deserve. To stay covered and protected, start by visiting us online at evolveins.com or call our office at 941-244-2760 and ask to get started a new quote today.
Owner, Evolve Insurance Agency
Photo Credit: Southern Fidelity Insurance Company