State Seizes Poe Insurance Subsidiary

State officials began seizing control Tuesday of the state’s third-largest homeowner insurance company, Tampa-based Poe Financial Group, in a move that could force more than 280,000 policyholders to find new coverage.

The failure of Poe subsidiary Southern Family Insurance Co. and the anticipated seizure next week of another Poe insurer could create new havoc for Florida’s troubled homeowner insurance market and have repercussions for all Florida homeowners.

Most of the Poe Financial Group’s policyholders are in coastal areas of South Florida, and many likely will be forced to seek coverage with the state-sponsored Citizens Property Insurance Corp., Florida Insurance Commissioner Kevin McCarty said in a letter dated Tuesday to the state’s chief financial officer.

As Florida’s insurer of last resort, Citizens has become the second-largest homeowner insurer in the state because insurance companies are leaving the market and dumping policies. All Florida homeowners must pay for Citizens’ deficits, which have mounted to more than $1.5 billion in the past two years. The more risk the company takes on, the more Florida homeowners could pay if another major hurricane strikes.

On Tuesday, Leon County Circuit Judge Thomas Bateman appointed the state Department of Financial Services as the receiver for Southern Family. The order came after McCarty declared the insurer insolvent.

Meanwhile, the state anticipates that a second Poe company, Atlantic Preferred Insurance Co., will be ordered into rehabilitation Monday for failing to meet capital and surplus requirements under Florida law, said Bob Lotane, a spokesman for state Chief Financial Officer Thomas Gallagher.

The rehabilitation may be short-lived. In his letter to Gallagher, McCarty recommended both companies be liquidatedJune 1. Insurance companies are liquidated if it is determined they cannot be put back into good financial health.

Poe’s third insurer, Florida Preferred Insurance Co., is expected to be ordered into rehabilitation June 1, Lotane said. It is unclear whether the company will need to be liquidated.

Poe Financial Group is owned by former Tampa Mayor Bill Poe Sr. and his family. It has based much of its business model on assuming the insurance policies covered by Citizens. In exchange, the company received millions of dollars in bonuses from Citizens for agreeing to carry the high-risk policyholders.

The 1996 gamble to begin assuming the high-risk policies didn’t start turning sour until 2004, when the first of an unprecedented eight major hurricanes began slamming the state.

Poe Financial Group was hit hard, paying out an estimated $2 billion in claims in 2004 and 2005. Although much of the losses was covered by reinsurance, the companies still paid out more than $300 million.

It was unclear Tuesday how much money the companies had left to pay claims.

Lotane said the Financial Services Department will use available company resources to pay claims. Once that money is gone, the Florida Insurance Guaranty Association will pay claims, he said.

Atlantic Preferred is the largest of the three Poe companies, with 140,000 policies, followed by Florida Preferred, with 100,000, and Southern Family, with 43,000 and more than 1,000 condominium association policies.

The fate of the 300 employees who work for Poe at its headquarters on Harbour Island was unclear Tuesday.

Tracy Upton, a senior vice president with Poe Financial Group, said Poe Sr. gathered employees about 3 p.m. Tuesday to inform them of the state’s action.

“He said it was unfortunate that there was not enough capital to move the operations forward,” Upton said. “Mr. Poe said we had come up a little bit short.”

The seizure of Southern Family is the second failure of a homeowners insurer resulting from the 2004 and 2005 hurricane seasons. A small insurer, American Superior Insurance Co., with 58,000 policies, failed because of losses from the 2004 hurricanes.

by: Randy Diamond