TALLAHASSEE – Angry at a ratings company that raised the potential of downgrading 17 Florida property insurers, state leaders may very well be poised to search for another.
The Joint Legislative Budget Commission subsequent week is predicted to contemplate a proposal to spend $1.5 million to rent a guide that will have a look at choices for property insurers to get sufficient monetary ratings.
Such ratings are vital, partly, as a result of mortgage-industry giants Fannie Mae and Freddie Mac require properties to be insured by financially sound corporations. If insurers lose passable ratings, householders may very well be compelled to search out different protection.
State insurance coverage regulators scrambled in July after they mentioned the Demotech ratings company threatened to downgrade 17 insurers amid widespread monetary issues within the property-insurance market. Demotech in the end downgraded one firm and withdrew ratings for 2 corporations, in response to the proposal going earlier than the legislative panel subsequent week.
Insurance Commissioner David Altmaier and state Chief Financial Officer Jimmy Patronis publicly questioned Demotech, with Patronis sharply criticizing the company in letters to leaders of Fannie Mae, Freddie Mac and the Federal Housing Finance Agency.
“If (Fannie Mae and Freddie Mac) de-authorized a sizeable percentage of Florida’s insurers based on the dubious ratings of one company, it would create financial chaos for millions of Floridians,” Patronis wrote.
The Department of Financial Services, which Patronis heads, submitted the $1.5 million proposal to the Joint Legislative Budget Commission, which is able to meet Sept. 9 and has energy to make mid-year finances selections. The outcomes of the guide’s work would go to Gov. Ron DeSantis and lawmakers for attainable consideration throughout the 2023 legislative session.
“Demotech’s business practices appear to have caused confusion and concern for Floridians regarding the Florida insurance market,” the proposal mentioned. “Due to the concern of the methodologies used by Demotech and the impact that questionable downgrades will have on millions of Floridians, immediate action is required. The spending authority provided in this budget amendment will allow key stakeholders to research and explore more predictable and reliable financial rating services or alternative solutions.”
Demotech President Joseph Petrelli in July defended the corporate’s strategies and mentioned the corporate has rated Florida insurers since 1996.
“Demotech has worked diligently to be a positive force in the resurrection and sustenance of the Florida residential property insurance marketplace that was devastated by Hurricane Andrew,” Petrelli wrote in a six-page letter to Altmaier, referring to the huge 1992 hurricane. “Since 1996, Demotech has consistently applied its rating methodology and appeal process to all rated insurers. Our process does not guarantee every carrier’s financial success, nor does our process guarantee carriers an FSR (financial stability rating) at a level that they desire or require.”
The ratings subject has come at a turbulent time in Florida’s property-insurance market, as carriers have shed insurance policies and sought giant fee will increase due to monetary losses. Five insurers have been deemed bancrupt since February and a big provider, United Property & Casualty Insurance Co., introduced final month it’s exiting the householders’ market.
United Property & Casualty was one of many 17 corporations focused by Demotech, which downgraded after which withdrew the corporate’s score.
After the preliminary downgrade of United Property & Casualty, the state Office of Insurance Regulation on Aug. 2 put the corporate into a brand new stopgap program aimed toward ensuring protection would proceed for householders.
The program entails the state-backed Citizens Property Insurance Corp. performing as a monetary backstop for personal insurers that get downgraded. Citizens took on a reinsurance position to assist be certain that claims receives a commission if insurers go bancrupt.
The program is designed to fulfill Fannie Mae and Freddie Mac in such conditions. It makes use of an exception in Fannie Mae and Freddie Mac requirements that applies when reinsurers take accountability for paying claims if insurers go stomach up.
