Kingsway Financial Services has announced that it has entered into an agreement to sell Zephyr Insurance Company, Inc. to Zephyr Acquisition Company, an acquisition vehicle of Ocean Harbor Holding Inc. and MP Holdings LLC, a Hawaiian based investor group.

The transaction is expected to be completed during the fourth quarter of 2009 subject to the receipt of regulatory approvals.

Zephyr is a specialty property insurance company founded specifically to protect Hawaii homeowners and residents from catastrophic loss due to hurricanes. For the first six months of 2009, Zephyr had gross premiums written of approximately $36 million, or 7 percent of the premiums of the Kingsway group of companies, and produced an underwriting profit.

Kingsway anticipates receiving initial gross proceeds from the transaction of $31.5 million, plus a contingent, deferred earn-out amount.