Firm downgrades 3 insurers in Florida, adding to concerns

Florida’s homeowners’ insurance market has faced losses over the past several years.
Florida’s homeowners’ insurance market has faced losses over the past several years.
Published: Aug. 3, 2022 at 12:47 PM EDT
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TALLAHASSEE, Fla. (AP) — A ratings agency has withdrawn ratings for two insurance companies and downgraded a third firm in Florida, raising concerns for homeowners who could end up paying more for insurance and further muddying a troubled market.

Demotech, which rates 40 Florida-based insurance companies, withdrew financial-stability ratings Monday for Weston Property & Casualty Insurance Co. and FedNat Insurance Co. and changed United Property & Casualty Insurance Co.’s rating from “A Exceptional” to “M Moderate.” The changes were first reported by the Insurance Journal.

The moves follow reports last month that Demotech planned to downgrade anywhere from 17 to 27 insurers from an A rating to ratings of either S, for substantial, or M. In response, the Florida Office of Insurance Regulation said the state-created Citizens Property Insurance Corp. would provide reinsurance for companies that Demotech planned to downgrade.

Citizens Property Insurance Corp. was created to provide insurance for property owners who can’t find policies through private companies, and it will guarantee that the companies will be able to pay out claims. Otherwise, homeowners with mortgages from Fannie Mae and Freddie Mac would have had to seek new policies.

Federal mortgage loan guarantors Fannie Mae and Freddie Mac require borrowers of loans it backs to maintain insurance coverage with A-rated insurers. Borrowers with insurance backed by companies rated below A could find themselves in default of the terms of their home loans. If that were to happen, Fannie Mae and Freddie Mac could then order mortgage servicers to get more expensive coverage by acceptable insurers on the home loans they manage.

In a bulletin for insurance agents posted on its website, Citizens said Tuesday that it was “ready to assist carriers in the event of a rating downgrade by Demotech.”

A spokeswoman for the Florida Office of Insurance Regulation said in an email Wednesday that United Property & Casualty Insurance Co. had qualified to participate in the arrangement with Citizens Property Insurance Corp.

Florida’s homeowners’ insurance market has faced losses over the past several years, and some major carriers have stopped writing homeowners’ policies in the state. Some industry experts believe legislative reforms enacted over the past two years were not enough to bring the state’s overall insurance market back to health.

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