(Bloomberg) — FedNat Holding Co., a Florida-based homeowners insurance company, filed for bankruptcy after an increase in severe weather events in the state weighed on its balance sheet.
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The company filed for Chapter 11 bankruptcy in Fort Lauderdale on Sunday, court papers show. FedNat listed $33.8 million of assets and $171 million of debts in its bankruptcy petition.
FedNat has racked up losses in recent years in part because more big storms hit coastal areas of the southeastern US, where the company operates. It has also suffered from the deluge of claims litigation dogging other small Florida insurers.
The bankruptcy underscores Florida’s deepening home insurance crisis, where average premiums are nearly triple the national average. Ron DeSantis — the Republican governor expected to make a presidential run — is attempting to reform the system, and the state’s senate has a special session to address the crisis starting Monday.
“As an industry, the Florida property insurance industry lost over $1.6 billion in 2020 and over $1.5 billion in 2021,” thanks to losses from catastrophes, higher reinsurance costs and litigation abuse, Chief Restructuring Officer Katie S. Goodman said in a sworn bankruptcy court statement.
Catastrophe losses cost FedNat $800 million on a gross basis last year, though reinsurance and other recoveries reduced that loss to $86 million, according to court papers.
In September, a Florida court ordered a FedNat subsidiary to liquidate after state’s insurance regulator deemed it insolvent. At least five other Florida insurers have been put into receivership by state’s regulator this year, Goodman said.
FedNat has about $6.5 million of cash on hand, enough to keep operating the business during bankruptcy, the company said in a statement. FedNat will consider reorganizing the business or selling its assets during the Chapter 11 process, according to the statement.
FedNat generated a net loss of about $103 million in 2021, following a loss of nearly $80 million in 2020, company filings show. Its stock recently changed hands for one cent.
The case is FedNat Holding Company, 22-19451, U.S. Bankruptcy Court for the Southern District of Florida (Fort Lauderdale).
–With assistance from Max Reyes.
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