United (UPC) to consolidate its Florida operations

Property and casualty (P&C) insurer United Insurance Holdings Corp. (UPC Insurance) has announced a plan to rationalise and consolidate its Florida property insurance writing.

This will involve sun-setting one of its four Florida-domiciled insurance carriers and then redistributing its capital across the other three.

The goal is to create a “more efficient operating structure going forward” the company explained yesterday.

However, it’s also possible that this is a smart way to manage capital across the four carriers, as it will boost three while retiring the use of one of the least well-capitalised.

The company had previously announced it was pulling-back on writing some new Florida homeowners’ business, citing recent years of catastrophe losses, rising reinsurance costs and still growing litigation related costs.

United (UPC) is seeking regulatory approval to merge its Journey Insurance Company entity into its American Coastal Insurance Company, leaving American Coastal as the surviving entity on a go-forwards basis.

“Journey’s financial strength rating will ultimately sunset and its capital will be redistributed between American Coastal Insurance Company, Family Security Insurance Company, and United Property & Casualty Insurance Company,” the insurance group explained.

There’s more to it than just capitalisation though, it appears, as the CEO explained how it will enable certain carriers to be more focused in future, while the group also recognises the capital benefits.

“Our plan will enable us to achieve more balance between commercial and personal lines by reallocating existing capital across our group and allowing American Coastal Insurance Company to focus exclusively on continued profitable growth in commercial lines while Family Security Insurance Company and United Property & Casualty Insurance Company focus exclusively on restoring underwriting profitability in our personal lines business,” Dan Peed, Chairman & CEO explained.

With many insurance carriers in Florida under pressure and any that are thinly capitalised expected to face challenges in sustaining their ratings without additional contributions, it seems natural to assume there’s an element of consolidating the United (UPC) capital base in this move.

As ever, we cannot be certain and the rationale explained, in terms of allowing the individual carriers to focus on their specialisms also makes sense.

But with the Florida property insurance market under extreme pressure, it’s likely United (UPC) is taking steps to ensure it is protected and has the capital deployed as efficiently as possible, while boosting the go-forwards sustainability of its carriers.

Also read: Florida property insurance market “in collapse”, special session uncertain.