Florida insurance regulators are taking “unprecedented” and “extraordinary” action to try and prevent thousands of homeowners from being forced to look for a new insurance policy like a rating agency. Demotech follows plans to cut back on many Florida carriers.
The Florida Office of Insurance Regulation announced a plan Wednesday to provide downed companies with additional insurance coverage through the state’s Citizens Property Insurance program.
The decision to hold financial responsibility for a group of struggling insurers highlights the challenges facing Florida as a large portion of the homeowner’s insurance market is on the brink of collapse.
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Downsizing of many companies can lead to chaos in the government, creating huge problems for the landlords and real estate companies.
What could Demotech’s downgrade mean for Florida’s insurance market?
Mortgage giants Fannie Mae and Freddie Mac require borrowers to have home insurance from a reputable company. Florida’s insurance market is dominated by small companies that only get ratings from Demotech, giving the company a strong presence in the industry.
Florida Insurance Commissioner David Altmaier wrote a letter to Demotech last week expressing concern that the company is about to drop “about 17” Florida insurers.
Downgrading companies could make lenders less likely to accept policies and force homeowners to seek help elsewhere, which is a problem in a government where insurers are dropping policies and raising premiums for policyholders.
“OIR’s priority is to ensure that consumers have access to insurance, especially during hurricane season; and because of the uncertainty with Demotech’s calculations, we are forced to take action to protect millions of consumers,” Altmaier said Wednesday in announcing the recall plan.
A press release from the OIR stated that providing the companies with the insurance underwriting would make their policies acceptable to Fannie Mae and Freddie Mac.
“Fannie Mae and Freddie Mac each offer exceptions to the requirements of insurance premiums provided by a reinsurer who accepts, by acceptance, 100 percent of the insurance’s liability for any loss that is paid, but not paid by the insurer, because of insolvency,” the release says. .
Gov. Ron DeSantis said on Wednesday that it makes sense to use Citizens as a means of reimbursing money for insurers, because if companies lower their policies, they will eventually go into Citizens – the last state insurance.
“If companies are going down and they have to release policies that can go beyond Citizens, then Citizens’ exposure is better to comply with those policies than it would be if it’s a rollback,” DeSantis said. press conference in Tampa.
Reinsurance is insurance for insurance companies. By providing such a service, Citizens would be ready to pay the bills if the insureds who are underwritten are unable to meet their demands. Rising insurance costs have contributed to the woes of Florida’s insurance industry, which relies heavily on such coverage.
The additional funding comes on top of a $2 billion rescue fund that was approved by state lawmakers in a special session earlier this year. This fund provides insurance at no cost to Florida insurers. It was part of a series of reforms aimed at stabilizing the insurance industry.
Demotech had planned to release its update on Tuesday, but said in a statement provided to USA TODAY Network – Florida that it is taking more time to update the ratings.
“As the current handling of the situation has been brutal and malicious and we have put a lot of effort into developing responses to other people’s letters, we will be taking additional time to review the information and consider the issues affecting companies operating in Florida,” he said. they read.
Follow Herald-Tribune political editor Zac Anderson on Twitter at @zacjanderson. He can be reached at zac.anderson@heraldtribune.com
