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Windhaven Insurance placed into receivership

The state of Florida has placed Windhaven Insurance Co. into receivership after its regulator determined that the company's financial condition had deteriorated to insolvency.

Since 2018, Windhaven had been underestimating its losses and was inadequately reserved before a third-quarter contingent liability pushed its surplus beneath the state requirement, according to court documents.

The company posted a fiscal year 2018 net loss of about $9.7 million, which ate away nearly 20% of the surplus it had at year-end 2017. The annual statement for that year showed a pattern of adverse reserve development reflecting consistently underestimated losses and a failure to properly reserve for them.

Windhaven recorded a 44.6% decline in cash and invested assets during the first nine months of 2019, falling to approximately $41.1 million from about $74.2 million.

In its third-quarter financial statement, the company reported a $26.1 million surplus that failed to include a $19.1 million contingent commission liability. Windhaven in November told the Florida regulator that the liability was being realized, dropping its surplus beneath the state's requirement that it maintain a surplus of at least $4 million or 10% of total liabilities, whichever is greater. The company also disclosed a $7 million reserve deficiency that further lowered its surplus.

Given the realized liability, Windhaven's total assets, which stood at about $157.5 million as of Sept. 30 before adjusting for the liability and reserve deficiency, would not be enough to cover all its liabilities. The regulator's office in November ordered the insurer to come up with at least $30 million in cash or cash equivalents, but the company did not comply.

Windhaven's board agreed to a receivership; the state Department of Financial Services on Dec. 9 petitioned to place the company into administrative rehabilitation.

A state court granted the order Dec. 12.

Windhaven notified its agents of the receivership around the time the order was granted, according to Insurance Journal, citing an email from the company to agents that the news outlet had obtained. The company does not expect any policies to be terminated, Insurance Journal stated.

Windhaven's other companies, The Hearth Group homeowners insurer and Windhaven National Insurance Co., will not be part of the receivership, the news outlet reported.