Florida’s insurance rating agency Demotech has informed approximately 17 property insurance companies that their ratings will be downgraded upon review of 2022 hurricane season reinsurance packets, according to a letter from the Florida Office of Insurance Regulation (OIR).
OIR Commissioner David Altmaier sent a letter to Demotech President Joe Petrelli on Thursday sternly requesting that the agency “perform a more comprehensive review” of rating downgrades. According to the letter, about 17 domestic insurance companies informed OIR that Demotech sent them letters advising that their ratings will be downgraded from an “A” meaning “Exceptional to an “S” meaning “Substantial” or “M” meaning “Moderate.”
These ratings are Financial Stability Ratings (FSR) that not only allow companies to operate in the state, but also, many Florida agents can only market and write policies for agencies with “A” ratings, according to the Insurance Information Institute. They also determine what kinds of loans homeowners can get.
When a company receives a “NR” or no rating, they are at high risk of entering receivership with the state, which could either result in rehabilitation or insolvency.
In a May interview with the Insurance Information Institute regarding FedNat’s rating downgrade, spokesperson Mark Friedlander explained why it hurts a company.
RELATED: 40+ companies file homeowners insurance rate decreases in order to use Florida’s reinsurance assistance funds
“That stops them from insuring homes that have federal mortgages and in some cases, it will stop independent agents from representing them. They will no longer be able to market their products to their customers because typically independent agents will only represent A rated companies. So in other words, it’s basically freezing their business. That’s not a model that is sustainable,” Friedlander explained.
“As such, we have endeavored to ensure that Demotech is able to derive its ratings based upon