State creates a backstop to protect homeowners’ insurance coverage through hurricane season

Florida homeowners will not lose the insurance Study or face the pressure put the plan if the insurance loses money calm Votes – at least through the hurricane season.

The Florida Office of Insurance Regulation today announced that the state, through the Florida Insurance Guaranty Association and the state’s Citizens Property Insurance Corp., will provide 100% coverage for any claims left by insureds that fail. The program will temporarily run through the hurricane season, which ends on Nov. 30.

In a news release, the bureau said the bond meets the requirements for mortgages and mortgage-backed lenders Fannie Mae and Freddie Mac that borrowers must be protected by A-rated insurers.

If the insurance rating drops below an A, Fannie Mae and Freddie Mac require mortgage lenders to force the property to pay higher rates if the home owner cannot immediately purchase an A-rated policy.

But Fannie Mae and Freddie Mac each provide an exception “for an insurer that assumes, by acceptance, 100 percent of the insured’s liability for any loss that is paid, but not paid by the insured, due to insolvency,” according to the release.

“This new arrangement meets the requirements set forth by the second home market,” Florida Insurance Commissioner David Altmaier said in a release.

“If we want to use this option temporarily, consumers won’t have to look elsewhere for coverage, agents won’t have to move policies, and borrowers can be confident that these insurers will continue to meet mortgage eligibility.”

The plan, which creates what’s known in the insurance industry as “excessive acceptance,” is “an excellent solution to a problem that could affect millions of insureds,” said Paul Handerhan, a resident of the Federal Association for Insurance Reform. , a Fort Lauderdale-based consumer watchdog group.

“Excessive approvals” are used “when you have a company that is at risk of credit,” he said. “You can buy a policy that will ensure you meet the policy’s requirements.”

In this case, a number of events must take place for the government to recover all the damage, said Handerhan.

First, the financial stability of the insurance company must be reduced. Second, the company must be insolvent. Third, the company must have open and available claims.

Under the current coverage, the Florida Insurance Guaranty Association is required to cover individual losses up to $500,000.

The additional level of protection would make citizens liable for any loss over $500,000.

Citizens, the state’s last insurer, currently has $6.7 billion in reserves and with reinsurance, $11.3 billion in debt service, Citizens spokesman Michael Peltier said.

So even though the chances of the government paying for the lost money are slim, the program guarantees to Fannie Mae and Freddie Mac that the property will be reimbursed 100%.

“It gives borrowers confidence that at the end of the day, they’re going to recover,” Handerhan said. “There’s no need to impose mandatory policies if the claims are proven by the government.”

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Altmaier’s office announced the program in response to concerns raised by a letter from accounting firm Demotech notifying 27 Florida insurers that their A ratings, which stand for Exceptional or Unsurpassed, would be downgraded on July 26. potentially millions of homeowners due to Fannie’s actions. Mae and Freddie Mac issued loans.

Altmaier and Chief Financial Officer Jimmy Patronis released letters Thursday blasting Demotech and asking whether the Ohio-based company is basing its decision on the health of Florida’s insurance market instead of the rate it used in the past.

On Monday, Demotech CEO Joe Patronis announced that it is delaying decisions on downgrading or affirming insurance ratings while it reviews other offers from affected insurers.

Demotech also sent a lengthy response to the bureau outlining its methods and arguing that it has not abandoned its old method of evaluating the financial stability of companies.

In today’s release, the office accepted Demotech’s response but said it did not provide a schedule of its decisions.

“Sudden loss of legitimate wealth [Stability] The audit could have a significant and negative impact on Florida insurance consumers, insurers, agents and the property insurance market. OIR remains committed to protecting Floridians and the property insurance market under this plan,” the release said.

Ron Hurtibise covers business and consumer news for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at