TAMPA, Fla. — As of August 1, Florida’s ranking company, Demotech, downgraded the monetary stability ranking of 1 property insurance firm and withdrawn ratings for 2 others.
Demotech downgraded United Property and Casualty Insurance from an “A” that means distinctive, to an “M” that means average.
The company additionally withdrew ratings for Weston Property Insurance and FedNat, which had been beforehand downgraded to an “S” that means substantial, in April.
A monetary stability ranking (FSR) is decided by “a company’s ability to survive a downturn in economic conditions as well as a downturn in the underwriting cycle and meet its policyholder obligations in any event,” in keeping with the Demotech web site.
A examine by Guy Fraker known as (*3*), commissioned by the Senate Banking and Insurance Committee, discovered that United Property Insurance was one of many prime firms for the most important web monetary losses in 2019.
Its underwriting losses had been 35,544, and its web earnings loss was 20,828. In 2019, United had about 5.3% of the Florida market with 761,039 insurance policies. They additionally had 1,405 pending lawsuits, an 80% enhance from 2016.
We additionally know that FedNat dropped about 60,000 prospects, or half their policyholders in latest months with the intention to keep away from going into receivership. According to the identical examine, FedNat had underwriting losses of 38,816 and a web earnings lack of 18,174.
In 2019, FedNat had 4.2% of the Florida market with 605,202. They additionally had 1,261 lawsuits, an 81.4% enhance from 2016.
The examine additionally states that in 2019, Weston Insurance had 0.6% of the Florida market with about 80,000 insurance policies and 17 lawsuits.
The ranking company had initially deliberate to launch new ratings on July 26 however determined to postpone after a letter from the Florida Office of Insurance Regulation (OIR) expressed deep concern with the attainable downgrade of about 17 firms, requesting the company return and re-evaluate their ratings methodology.
Demotech mentioned in a response that they’d been working with insurance firms to permit them to additional show monetary stability.
When an organization receives an “NR” or no ranking, they’re at excessive threat of getting into receivership with the state, which may both end in rehabilitation or insolvency.
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It’s unclear what these ranking downgrades actually imply for these firms, brokers, and owners.
Prior to emergency motion from OIR final week, any ranking lower than A would disqualify owners from receiving Freddie Mac and Fannie Mae mortgage loans. The short-term program establishes backup reinsurance from Citizens to any firm that’s downgraded, which permits their prospects to be in compliance with their mortgage suppliers.
In addition, impartial brokers are usually not sometimes permitted to jot down for insurers with lower than an ‘A’ ranking. Two brokers inform us that it is not clear what the results for them and their shoppers will probably be but. One mentioned they’re nonetheless involved that mortgage suppliers would require prospects to modify carriers.
We have inquiries into Demotech in addition to all three property insurance firms for additional information on what prospects have to know. We haven’t heard again but however will replace this text once we study extra.
As far as standards for FSR’s, Demotech states on their website:
“Our rating process is based on an analysis of a series of quantitative ratios and certain qualitative considerations. Typical information reviewed by Demotech for an established insurer may include:
- Quarterly and annual statutory financial statements
- Management discussion and analysis
- Statement of actuarial opinion
- Actuarial opinion summary
- Audit report
- Reinsurance information.”