Demotech, a ratings agency for insurance companies, is set to downgrade 17 Florida property insurers, delivering another blow to an already fragile market.
It also spurred a swift response from Chief Financial Officer Jimmy Patronis and the Office of Insurance Regulation, which blasted the decisions.
Patronis called Demotech a “rogue ratings agency” playing “havoc with the financial lives of millions of Floridians,” in a letter to the leaders of the Federal Housing Finance Agency, Fannie Mae and Freddie Mac, government-backed groups that guarantee mortgages.
Demotech is the only agency that rates domestic Florida insurers, so Fannie Mae and Freddie Mac, which require mortgages to have minimum property insurance coverage, would not back up those mortgages.
“The purpose of this letter is to urge you to reconsider your reliance on Demotech as the primary ratings agency for rating the strength of Florida’s domestic insurance market and to give Florida lenders time to identify a suitable alternative ratings body to evaluate the financial strength of Florida insurers,” Patronis wrote.
In a separate letter, OIR Commissioner David Altmaier wrote to Demotech president Joseph Petrelli, distressed that a downgrade of their financial stability rating from an “A” rating to an “S” (substantial) or “M” (moderate) is forthcoming for 17 companies.
“OIR is compelled to take the extraordinary step of scrutinizing these unprecedented actions to protect the Floridians we serve, especially two months into hurricane season,” Altmaier wrote. “This is an example of inconsistent, monopolistic power of a select rating agency and is trying to exert coercive influence over Floridians and policymakers in an effort to thwart public policy according to its own opinions.”
Demotech’s new ratings haven’t been made public, so the identity of the companies isn’t yet known, but Patronis’ and Altmaier’s letters say the agency has been in contact with the companies staring at imminent downgrades. OIR’s letter indicates the companies were informed of the downgrades on Tuesday, and they are slated to take effect on July 26.
Reinsurance is one of the main issues, which has become much more expensive this year as reinsurers take a more skeptical eye on the Florida market. Some carriers have been priced out of the market altogether, jeopardizing their ability to keep the minimum amount of claims-paying ability on their books.
But Patronis says in his letter that all downgraded companies have been able to obtain reinsurance. And Patronis and Altmaier contend Demotech hasn’t considered the changes to the law passed by the Legislature in a Special Session in May, which set up a $2 billion reinsurance fund and sought to limit the amount and expense of litigation for insurers.
If Demotech is allowed to go through with the downgrades, Patronis wrote, the consequences for Florida could be dire.
“Not only could Florida families end up being required to accept expensive and inadequate forced-placed coverage from their lender, but a ‘rug-pull’ of this magnitude would expose over 115,000 Florida insurance agents to litigation risks,” Patronis wrote.
July 21, 2022 at 6:58 pm
Vote RED for Republican grifts and scams
Vote RED for fraudsters like Rick Scott
Vote RED for capitalist karens grifting the working poor into slavery…
July 22, 2022 at 10:44 pm
Blue destroys everything it touches just like clown Biden. Move back to your blue state and stay!
July 23, 2022 at 7:20 am
DeathSantis is an authoritarian.
July 21, 2022 at 7:46 pm
Wow, this will be big news if it goes through as reported. Thanks for sharing, and hopefully there is some way to resolve the financials without all the downgrades.
July 22, 2022 at 7:09 am
Yet, DeSantis is too busy chasing after social issues while the residents of Florida are suffering.
Time to take out the trash
July 22, 2022 at 10:42 pm
You sound very uneducated in general!
July 22, 2022 at 10:44 pm
That’s hilarious. Remember his running mate? Get a grip.
July 23, 2022 at 7:17 am
DeathSantis is an authoritarian.
July 22, 2022 at 7:32 am
This past legislative special session on property insurance was essentially political theater with no concrete action to fix our property insurance ecosystem. This could be the harbinger of more bad things to come.
July 22, 2022 at 12:56 pm
Desantis has nothing to do with the problem with our insurance market this has been going on for years and years. It’s the lawyers, contractors and PA’s that have ruined this state and it’s the elected Representatives and Congressmen, the good ole boy’s club that keep allowing it to happen. The Governor doesn’t make the laws, he signs them.
July 22, 2022 at 1:53 pm
bad laws aren’t made until they’re signed. bad policy is guided from the top. nice try, but the buck stops somewhere and if desantis wants to take credit he also has to take the blame.
July 22, 2022 at 10:47 pm
Definitely blinded by the light.. So sorry for you.
July 22, 2022 at 6:53 pm
Which 17 companies? Or, why no hyperlink?
July 23, 2022 at 9:51 am
DeSantis is a good guy and great governor compared to his past contender, Gillum. Florida dodged a bullet. He was a tax and spend progressive druggie. We want to keep Florida a Red state with low taxes and conservative policies. I hear CA is looking for people with a blue state mentality.
July 24, 2022 at 4:18 am
The truth is that Florida is a high risk property market making insurance more expensive. Insurance companies need to have higher capital levels and/or carry more reinsurance to survive the higher potential for catastrophic losses.
If you want to blame a politician for screwing up the insurance market, look no further than Charlie Christ. His policies drove out many of the best capitalized, highest rated insurance companies.
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