State Tab For Failed Insurer Triples

By RANDY DIAMOND The Tampa Tribune

Published: Oct 11, 2006

The estimated cash that will be needed to pay the claims of the Poe Financial Group's three insolvent homeowners insurance companies has grown to $845 million - nearly three times the amount originally estimated several months ago.

The Florida Insurance Guaranty Association, which covers the claims of defunct insurers, says the financial hit from the Poe failure may be higher than estimated because FIGA has determined that the number of claims it expected to cover has almost doubled. FIGA initially estimated it would need to cover 20,000 claims, most of them related to hurricanes in 2004 and 2005, totaling $300 million. It now estimates it will pay on 38,000 claims totaling $845 million.

As a result, all property insurance policyholders throughout Florida could end up paying additional surcharges on their homeowners insurance bills for years.

As homeowners get renewals on their policies this year and next, they are likely to see a 2 percent assessment to help pay for the financial collapse of Poe. The Tampa-based company operated three insurance subsidiaries: Southern Family Co., Atlantic Preferred Co. and Florida Preferred Insurance Co. That 2 percent surcharge will raise $225 million to help cover claims outstanding at the time of the Poe insolvency. At the time of the collapse, FIGA had $100 million to cover claims.

Now, with more claims than initially expected, FIGA may need to continue the assessments for several more years, said Michelle Lovern, FIGA's deputy director. FIGA probably will not make a decision until next year. Under state law, FIGA may only levy a maximum 2 percent assessment annually, Lovern said.

She said the court appointed receiver for Poe still needs to determine how much Poe's reinsurance policies will pay. She said the reinsurance payouts could be about $200 million.