According to Joseph Petrelli, President and Co-Founder of score company Demotech, the corporate has taken a choice that might see it declining to rate extra or new carriers within the beleaguered Florida property insurance coverage market.
Petrelli advised Artemis {that a} resolution taken on December 2nd on the score company means score more carriers in Florida is unlikely at the moment.
“Although Demotech, Inc. will continue to support the Florida focused insurers that we review and rate; on a going forward basis, we have an extremely limited appetite for additional business in Florida.,” Petrelli defined.
Demotech will proceed to overview and rate present shoppers, with in-force contract phrases persevering with to apply.
However, these carriers’ present Financial Stability Ratings (FSR) will not be assured, as a overview might lead to motion both approach.
Demotech got here under-fire earlier this yr round and simply after the all-important mid-year reinsurance renewals, the place a few of Florida’s property insurance coverage carriers have been seen to wrestle.
Petrelli has been outspoken on the dearth of progress on reforming Florida’s property insurance coverage market made by legislators, calling new measures enacted after the May 2022 Special Session “inadequate.”
After Demotech cautioned that as many as 17 Florida property insurance coverage carriers have been at-risk of getting their rankings downgraded in July, he elicited a backlash from Florida’s state Insurance Commissioner and CFO.
Soon after a US Senator added his voice to calls for a Federal review of Florida’s “dependence” on Demotech as a rating agency, and in latest weeks the state has employed a guide to run a course of to set up what choices could possibly be out there.
Demotech’s course of continues to elicit sturdy help from throughout the insurance coverage and reinsurance business although, with most recognising that the dysfunctional state of Florida’s property insurance coverage market, the litigation and fraud epidemic in property claims, and likewise the dearth of lawmaker motion taken, are all of the true drivers of Florida’s property insurance coverage market disaster.
Petrelli is eager to level out that this resolution doesn’t sign Demotech pulling-out of Florida, however moderately a lowered urge for food for score new or extra insurance coverage corporations working in Florida.
But, because the crucial statements that emerged from Florida state leaders together with the CFO, Commissioner, Senator Marco Rubio, and Governor earlier this yr, and the transfer to have a look at different score choices, Demotech’s urge for food has waned.
“Recognizing that we were invited to assist the State of Florida in 1996 when others were unwilling or unable to do so, we view the letters in July 2022 and the RFQ to replace us as our invitation to leave,” Petrelli defined.
He continued, “In late July 2022 after the letters unjustly and erroneously attacking Demotech, I asked an elected official to intervene on our behalf to schedule a conversation with the Governor’s office, CFO’s office and OIR. This individual advised that “they are not interested in talking to you, they view you as the enemy and want to destroy you and your company.”
“Also, ironic, after decades of trying to discuss accepting our FSRs of S or better, rather than A or better, which was our original request to Fannie and Freddie back in 1989, we were involved in negotiations and conversations with both Fannie and Freddie to provide information on our S rating, its acceptance within the insurance industry, and were fairly well engaged in discussions. The inaccuracies and misinformation in the state’s letters dated July 2022 resulted in a cessation of those conversations.”
On the problems going through Florida’s property insurance coverage market and the way they are often meaningfully solved, Petrelli stated that, “The litigation level emanating from Florida’s 8% of HO claims countrywide is nearly 80% of countrywide HO litigation. It is my actuarial opinion that the 80% must be reduced to the representative level of 8% to encourage the private reinsurance community to return to FL.”
“As to carriers that failed prior to the 650,000 claims caused by Ian and Nicole, each of them was litigated to death in an extremely short period of time. Levels of new litigation in 2019 and 2020 were moderate, then in 2021, opportunists seemed to open the litigation spigot. One carrier with a small percentage of Florida’s HO market had more new litigation in 2021, then the entire $12 billion HO market of California, the fifth largest economy in the world,” he continued.
Petrelli additionally highlighted modifications within the management at Florida’s Office of Insurance Regulation, as he has heard that Susanne Murphy, Deputy Commissioner of P&C on the OIR, left on the finish of November.
“Given her longevity and stature at OIR, this leaves a gap for Commissioner Altmaier to fill, during a critical point in Florida’s residential property insurance market place,” Petrelli stated.
In closing, Petrelli summed up, “While we remain committed to the carriers that we currently review and rated that are focused on writing Florida residential property insurance, it is my opinion that the invitation extended to Demotech in 1996 has been withdrawn.”
The state of Florida’s property insurance coverage market is a key driver of the “extremely limited” urge for food Demotech now has to rate extra corporations working within the state.
But, alongside this, the way in which state leaders and lawmakers have sought to blame the score company for inflicting extra points this yr, when all Demotech has finished is apply its score standards to a cohort of insurers that have been in lots of instances financially unstable, is clearly one other issue.
The latest RFQ course of, which noticed a consultancy sending out a survey to insurers’ within the state, asking for suggestions on Demotech and their concepts as to potential options, seems to have been virtually a proverbial nail within the coffin for Demotech’s urge for food in Florida.
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