BY Fraser Tennant
Three months after the liquidation of FedNat Insurance Company, regional insurance holding company FedNat and certain of its wholly-owned subsidiaries have filed for Chapter 11 bankruptcy.
The Florida-based FedNat filed for bankruptcy after an increase in severe weather events in the state weighed on its balance sheet. In 2021, catastrophe losses cost FedNat $800m on a gross basis, although reinsurance and other recoveries reduced that loss to $86m, according to bankruptcy court papers.
Listing $33.8m of assets and $171m of debts in its petition in the United States Bankruptcy Court for the Southern District of Florida, FedNat’s bankruptcy filing underscores Florida’s deepening home insurance crisis, where average premiums are nearly triple the national average.
As an industry, the Florida property insurance industry lost over $1.6bn in 2020 and over $1.5bn in 2021, thanks to losses from catastrophes, higher reinsurance costs and litigation abuse. In addition, at least five other Florida insurers have been put into receivership by the state’s regulator in 2022.
As part of the Chapter 11 process, the company has stated that it will evaluate all strategic alternatives to maximise value for stakeholders, whether that be a reorganisation of its business or a sale of its assets.
FedNat has approximately $6.5m of cash on hand, which will provide liquidity to support day to day operations during the Chapter 11 process, enabling the company to operate business uninterrupted, including the timely payment of employee wages and benefits and continued servicing of customers.
Additionally, the company will file customary “First Day” motions to allow it to maintain operations in the ordinary course. The company intends to pay its employees in the usual manner and continue their primary benefits and certain customer programmes without disruption.
FedNat expects to receive court approval for all these routine requests.
To manage the restructuring process, FedNat has engaged GGG Partners, LLC as financial advisers and Nelson Mullins Riley & Scarborough LLP as legal advisers.
FedNat is an insurance holding company that controls substantially all aspects of the insurance underwriting, distribution and claims processes through its subsidiaries, equity investments and contractual relationships with independent agents and general agents.
News: Three Months After Liquidation, FedNat Holding Co. Files Chapter 11 Bankruptcy