FedNat announces $15m Hale investment in Monarch & Florida plans

Florida-focused property insurance company FedNat Holding Company has announced that it has secured a $15 million investment into its Monarch National Insurance Company subsidiary, which will now assume the rest of the group’s Florida policies.

FedNat has been planning its restructure, downsizing and refocusing onto the Florida property insurance market, as it seeks to get its business into a sustainable shape so that it can secure its necessary reinsurance and recover its rating.

FedNat Insurance Company had been downgraded by Demotech, after which the carrier group announced its plan and said that an investment into Monarch was coming.

Now, the company has said that funds managed by Hale Partnership Capital Management LLC, a North Carolina based investment adviser, will inject $15 million of capital into Monarch, after which FedNat will also contribute additional capital to Monarch, to further enhance its surplus position.

Hale will become the minority owner of Monarch, while FedNat will have a minority stake still.

FedNat said this transaction with Hale has been approved by the Florida Office of Insurance Regulation and that after the transaction completes Monarch will assume approximately 83,000 policies insuring Florida insureds from FedNat Insurance Company (FNIC), effective June 1st 2022.

The rest of FNIC’s Florida policies will be cancelled and all unearned premiums will be remitted to policyholders in accordance with applicable law, which the company said it has the money to support.

FedNat will also cancel the Florida policies of its Maison Insurance Company subsidiary as well, as of June 30th.

For the Florida focused book transferred to Monarch, FedNat will remain the policy servicing and claims administration company.

Importantly, Monarch anticipates now being able to secure its necessary reinsurance, with a catastrophe excess of loss reinsurance program for the 2022-2023 storm season designed to protect its surplus and consistent with its historical reinsurance structure.

Monarch feels its reinsurance structure will provide appropriate and responsible protection against multiple catastrophic events.

Other policies of the FedNat group will go to a SageSure carrier, for Alabama, Mississippi, South Carolina and Texas, while Louisiana policies will be cancelled and a replacement policy offered through a SageSure carrier as well.

All of which will leave FedNat Holding Company as a minority stake holder in now Florida focused Monarch National Insurance Company, while a subsidiary will be the policy servicing and claims administration entity for the Monarch policy book.

It sounds like FedNat now has its reinsurance for Monarch arranged and the carrier will therefore be able to retain a rating, if sufficient reinsurance is procured and no gaps left in its tower.

But the remaining entity will be a far smaller carrier than the FedNat group once represented across the US southern states, so it will be interesting to see how ambitious Monarch is in future and whether it is refocusing on Florida at just the right time, or not.