TAMPA, Fla. – As of August 1, Florida’s regulator, Demotech, downgraded the financial stability of one property insurance company and removed the ratings of two others.
Demotech downgraded United Property and Casualty Insurance from an “A” rating for exceptional to an “M” rating for moderate.
The agency also downgraded Weston Property Insurance and FedNat, which had previously been downgraded to “S” rating, in April.
Financial stability (FSR) is determined by “a company’s ability to survive recessions and write-downs and meet its obligations under any circumstances,” according to Demotech’s website.
Guy Fraker’s research called ‘Florida’s P&C Insurance Market: Heading for a Fall’conducted by the Senate Banking and Insurance Committee, found that United Property Insurance is one of the companies that lost the most money in 2019.
His recorded losses were 35,544, and his net losses were 20,828. In 2019, United had about 5.3% of the Florida market with 761,039 points. They also had 1,405 pending cases, an 80% increase from 2016.
We also know that FedNat has dropped about 60,000 customers, or half of its existing customers, in recent months to avoid receivership. According to the same study, FedNat lost 38,816 records and a total of 18,174 losses.
In 2019, FedNat had 4.2% of the Florida market with 605,202. They also had 1,261 cases, an increase of 81.4% from 2016.
The survey also says that in 2019, Weston Insurance had 0.6% of the Florida market with about 80,000 policies and 17 cases.
The insurance agency originally planned to release new rates on July 26 but decided to postpone it after a letter from the Florida Office of Insurance Regulation (OIR) that showed serious concern and the decline of about 17 companies, asking the agency to go back and restart. evaluate their reading methods.
Demotech responded that they have been working with insurance companies to allow them to ensure financial stability.
Whether a company receives an “NR” or not, it is at high risk of government filing, which could lead to restructuring or bankruptcy.
It is unclear what these price cuts mean for these companies, utilities, and homeowners.
Before the emergency action from OIR last week, any rating lower than A would have prevented homeowners from receiving loans from Freddie Mac and Fannie Mae. The temporary system establishes backup insurance from Citizens to any company that has been downloaded, which allows their customers to follow their credit providers.
In addition, independent agents are not allowed to underwrite insurers with less than an ‘A’ rating. Two agents tell us that it is unclear what the outcome will be for them and their clients. One said he was worried that lenders would require customers to switch carriers.
We’ve got questions from Demotech and all three home insurance companies for more information on what customers need to know. We haven’t heard yet but will update this story when we learn more.
According to FSR’s principles, Demotech are listed on their website:
“Our rating system is based on an analysis of the frequency of exposure and other factors of the situation. The information that Demotech has reviewed and insured may include:
- Monthly, quarterly and annual reports
- Leadership discussion and analysis
- Knowledge of actuarial thinking
- Summary of Actuary opinions
- Audit report
- Information reinsurance.”