Florida insurance regulators took over Fort Lauderdale-based Guarantee Insurance Co. Monday, two weeks after determining that the company was insolvent.
A spokesman for the Office of Florida's Chief Financial Officer told the Business Journal that the Florida Department of Financial Services (DFS) was officially appointed as a receiver of Guarantee Insurance Co. late Monday.
He added that DFS officials will be "on site assisting Guarantee Insurance Co. with moving forward through the liquidation processes."
The non-profit Florida Guaranty Association, a state fund that pays claims of insolvent insurance companies, will help pay the outstanding unpaid claims of GIC's policies.
Florida's fund will only pay claims for policies written in Florida. For other states where Guarantee did business "the processing and payment of pending workers’ compensation claims will be made in accordance with the statutes of each of those affected states," a spokesman said.
Gurantee was licensed to sell worker's compensation insurance in forty states and the District of Columbia, and wrote business in thirty-one states and the District of Columbia at the time of liquidation.
Guarantee had approximately 8,600 active policies as of November 13, 2017, including 1,250 in Florida. Based on its 2016 annual report, the company wrote $279.9 million in gross premiums in 2016.
Guarantee was majority owned and founded by Steven Mariano, who also founded Patriot National Inc., a publicly traded insurance services company that counted Guarantee as one of its biggest customers. Mariano resigned from Patriot in July amid a falling stock price and shareholder lawsuits.
According to the Florida Office of Insurance Regulation, Guarantee Insurance Company's board consented to being placed in receivership on November 13.
In a Nov. 17 letter to Florida’s Chief Financial Officer Jimmy Patronis, regulators determined that Guarantee had insufficient assets to pay all outstanding obligations. According to the letter, GIC's actuary asked the company to increase its reserves, which caused the company to go from a $42.18 million surplus to a deficit of $236,775.
In addition to being insolvent, regulators said that Guarantee "systematically transferred funds totaling at least $15.74 million to Steven Mariano" through June 2017 "with no discernible benefit to GIC or documented business purpose."
Guarantee Insurance Co. was Patriot National's biggest customer. As a result of the company being placed in state receivership, Patriot National lost 60 percent of its business and had to lay off 250 of its employees, according to a recent filing with the Securities and Exchange Commission.
A call to Guarantee Insurance Co.'s CEO Mike Sluka was not immediately returned.
(Article Courtesy: Keith Larsen via South Florida Business Journal)