Insurers won’t see ratings downgraded on Tuesday after all

A slew of ratings downgrades for Florida-based insurers didn’t happen Tuesday after all.

The CEO of Ohio-based Demotech, who last week sent letters to 27 insurers telling them that their financial strength ratings would be downgraded on July 26, on Monday afternoon sent a letter to Insurance Commissioner David Altmaier calling it off “until further notice.”

The downgrades, from A, which stands for “Exceptional” or “Unsurpassed,” would place hundreds of thousands, perhaps millions of homeowners with mortgage loans out of compliance with loan terms dictated by federal mortgage guarantors Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac requires homes it backs be insured by A-rated carriers. Numerous Florida carriers are only rated by Demotech, meaning loss of their A rating could put policyholders at risk of having more expensive coverage force-placed by their mortgage loan servicers.

Altmaier and Florida Chief Financial Officer Jimmy Patronis on Thursday wrote Demotech, demanding to know why it had seemed reached beyond its quantitative ratings methodology and planned to downgrade the companies based on the company’s pessimistic view of Florida’s insurance market.

In letters informing insurers of the impending downgrades, Petrelli said that it would not accept remedies, such as increased capital investment, that it had accepted in the past to allow companies to retain their A ratings.

The downgrades, he said, largely from “the unwillingness or inability of the [Florida] legislature” — during a special insurance session just before hurricane season — “to address longstanding disparate, disproportionate levels of litigation, and increasing claims frequency that has, in a level of dysfunction that renders our previous accommodation inapplicable.”

Monday’s letter put those downgrade plans on hold. Florida’s Office of Insurance Regulation released Petrelli’s letter without comment.

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