Many of the crazy denials and claims positions taken by United Property and Casualty Insurance Company (UPC) have been caused by the company trying to financially survive. It does not make it right. It has led to thousands of unnecessary lawsuits, which the company then blames on lawyers rather than looking in the mirror at its own wrongful conduct.
UPC suffered a critical financial blow when Hurricane Ian struck. One rating agency further lowered an already low rating. An article1 noted:
Other credit negatives include a historical trend of adverse reserve development, geographic concentration and dependence on reinsurance somewhat offset by a conservative investment portfolio and an experienced management team.
United’s $36.4 million estimate or losses from Ian is before income taxes, net of expected reinsurance recoveries, and includes a net retention of $16.4 million split approximately $7.4 million to UPCIC and $9.0 million to American Coastal Insurance Company, plus a $20 million retention by its captive reinsurer, UPC Re.
UPC Insurance has received approximately 19,000 claims to date and estimates it will receive 27,000 to 30,000 claims in total with a gross estimated loss of $1 billion.
The company also expects to incur about $16 million of reinstatement premiums that will be amortized over the remaining duration of its core catastrophe reinsurance program expiring May 31, 2023.
KBRA said that a significant infusion of capital from United into UPCIC could result in stabilization of its ratings, but warned that further downgrades could also be driven by deterioration in capital, further impactful weather events, continued operating losses, or an inability to collect on reinsurance.
Maybe UPC will find a golden angel to buy it or make a significant reinvestment. But this company is obviously insolvent, and it has been acting like it for quite some time when it comes to claims handling.
The only good thing from such an insolvency is that the wrongful claims conduct will stop. There is nothing else good from this. Policyholders, employees, and the general insurance markets will suffer. This is sad.
My further concern is that other insurance carriers are facing the same financial issues. Hurricane Ian may not be the costliest hurricane to hit Florida, but it may be the most disastrous.
Thought For The Day
A bankruptcy judge can fix your balance sheet, but he cannot fix your company.