American Keystone was backed financially by a Sarasota man who had been banned by the insurance industry, but still managed to win a license to sell Florida home insurance policies. Florida’s top insurance regulators suspected convicted felon William Griffin was involved in the company, yet repeatedly overruled their own staff’s suggestions to restrict or close down the company. Ultimately, American Keystone failed, but only after regulators put thousands of homeowners at risk by allowing the unsound insurer to operate through the 2009 hurricane season.

By PAIGE ST. JOHN, staff writer- For most of 2009, American Keystone was an empty promise.The Florida company insured some 70,000 homes and condominiums worth $12 billion with just a few hundred thousand dollars in operating cash.At the height of hurricane season, Keystone was so low on money the Florida Office of Insurance Regulation deemed it “injurious to its policyholders and to the public.”

Had a hurricane arrived, thousands of Floridians would have found themselves with worthless policies.But the state agency did not shut Keystone down.Records sealed from public view for nearly a year show regulators chose to allow Keystone customers to unknowingly gamble through an entire hurricane season. The delay bought Florida regulators a chance to orchestrate a “soft landing” instead of an abrupt collapse and gave Keystone’s investors a chance to search for a buyer. Meanwhile, company insiders continued to pay themselves hundreds of thousands of dollars in salaries and consulting fees.

A yearlong Herald-Tribune investigation found that allowing struggling insurers to remain in business has become an alarming part of how Florida regulators cope with the state’s ongoing property insurance crisis