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Downgrades are Imminent for Several Florida Insurance Companies

By February 21, 2017June 9th, 2020Homeowners

On February 6, 2017, Demotech, the rating agency that assigns letter grade ratings to 57 insurance companies in the state of Florida, announced that it was suspending guidance for Florida property insurers. The response, which is bound to affect consumers and the housing market, is a result of the insurance industry’s continued fight against assignment of benefit claims, Hurricane Matthew claims, and two Supreme Court rulings that went against insurers in 2016.

In the letter, Demotech mentioned that they had advised several insurance companies to infuse additional capital by February 28th or face potential downgrades. If downgraded, the companies would lose their A ratings which is a requirement of almost all mortgage companies, including Fannie Mae and Freddie Mac.

Experts believe there are four to eight companies that could be downgraded as of mid-March. Although lenders may react differently, we are assuming lenders will require that their customers have insurance with an insurance company rated ‘A’ or better by Demotech. This means that some of our clients may need to be rewritten with a carrier that maintains an A rating by Demotech.

Although there has been some speculation, it is hard to say which carriers will be affected. Most experts believe many of the Citizens takeout carriers could be affected as many of these companies are relatively new with very low surplus and reinsurance. If this is the case, we will most likely see a resurgence of policies back to Citizens.

Although some people may be pleased that insurance companies are losing money, this is really not in the best interest of the consumer . If insurance companies don’t have needed surplus, they have the potential go bankrupt and not pay out on claims. Also, downgrades will result in less consumer choice and will most likely result in premium increases from the carriers that remain viable in the market.

If your current insurance company is affected by the downgrades, our agency will be mailing a downgrade letter to you, advising of the need to look at rewriting coverage. We are here to help make the process be as seamless as possible.

If you have any questions about the downgrades or about your insurance company’s financial strength please call us at 727-345-0242 or email Brian Ford, CPCU at