Follows Demotech ratings downgrades
What a tumultuous two weeks it’s been for Florida’s property insurance market. While it reportedly reaffirmed “A” ratings for a majority of Florida’s domestic insurance companies, ratings agency Demotech downgraded three companies and pulled ratings altogether on two others, one of which was promptly sent to the Department of Financial Services to commence receivership proceedings. Meanwhile, another company has discontinued its Florida homeowners business and another two announced they were restricting their new business.
Last Monday, Demotech pulled its Financial Stability Ratings (FSR) for:
- Weston Property & Casualty Insurance, which had been rated “A Exceptional” for the 11 years it’s been in business. The next day, the Florida Office of Insurance Regulation (OIR) found the company to be insolvent and issued a referral letter that included a Consent Order for Receivership. Weston has about 22,000 polices in Florida. It’s the fifth Florida insurance insolvency this year.
- FedNat Insurance, which just completed an OIR-approved restructuring and transfer of its remaining 83,000 policies to A-rated sister company Monarch National Insurance. Monarch began writing new business this past Friday.
The three downgraded companies are:
- United Property & Casualty Insurance (UPC), from “A Exceptional” to “M Moderate.” The company stopped writing Florida policies in January and just finished a major reorganization. UPC had about 185,000 policies as of March 31st. (See Regulators’ Reaction in this newsletter for more on UPC)
- Florida Family Insurance and Florida Family Home Insurance, from “A Prime” to “A Exceptional.”
Meanwhile, Bankers Insurance has announced its discontinuing its Homeowners (HO3) and Dwelling Fire (DP3) lines in Florida. “Recent legislative measures, unfortunately, failed to adequately address the immediate financial challenges faced by property and casualty insurers, including combating fraud and litigation which exponentially outpaces every other state,” it wrote in a notice to agents. Bankers gave four months’ notice, so existing homeowners policies will remain in effect through this hurricane season, November 30. Two other Bankers companies, Bankers Specialty Insurance and First Community, voluntarily withdrew their Demotech ratings “over lingering concerns about the company’s methodology.” The Bankers Group is still writing HO4, commercial lines, flood, and builders risk policies in the state.
Unrelated to ratings, American Traditions Insurance announced it will stop writing new business this week and Southern Oak Insurance is now writing only newly built homes with a $250,000 coverage limit and no longer writing in 10 counties.
There is good news from Demotech, too. It has reportedly affirmed the “A” ratings of 27 of the 40 Florida domestic carriers that it rates. There are a few we are still awaiting final ratings. As we reported in our last newsletter, Demotech received inquiries from OIR and Florida’s CFO on its methodology in this year’s evaluations. Demotech President Joe Petrelli, in a statement, responded “It should be noted that although our published methodology allows for discussion and appeal of rating decisions, it does not include any requirement for Demotech to provide a remedy or allow a rated entity a certain period of time to correct issues.” And in his response to Insurance Commissioner David Altmaier, Petrelli wrote “In Florida’s residential property insurance marketplace, challenges continue to emanate from disparate, disproportionate litigation. Our FSRs must recognize the financial impact of those challenges on the carriers that we review and rate.”
LMA Newsletter of 8-8-22
