Dominoes began to fall this week as one of the nation’s most-respected insurance rating firms took action by downgrading three Florida insurance companies, including one based in Coral Gables.
Demotech, a financial analysis and rating firm out of Columbus, Ohio, withdrew financial-stability ratings for Weston Property & Casualty Insurance Co., a South Florida group with more than 19,500 policyholders.
Demotech officials told Islander News the company does not discuss its rating decisions publicly.
Demotech, which reportedly rates 40 Florida-based insurance companies, also withdrew its rating for FedNat Insurance Co. (three months after downgrading its rating from an “A” rating to “S Substantial”), and changed United Property & Casualty Insurance Co.’s rating from “A Exceptional” to “M Moderate.”
Weston previously had been given an “A” rating.
Rating withdrawals have historically preceded insolvencies or a change of direction for struggling carriers. The “M” rating may not be as severe, but it is not generally accepted by federal home loan buyers, known as Fannie Mae and Freddie Mac.
That means a portion of Weston’s policy holders who carry mortgages, for example, could find themselves in default of the terms of their home loans, although state officials might have come up with a solution.
Tuesday, the state-created, “last resort” Citizens Property Insurance Co. threw out a critical life preserver by posting a bulletin for insurance agents, saying it was “ready to assist carriers in the event of a rating downgrade by Demotech.” Citizens now covers more than 900,000 homes.
“This temporary reinsurance arrangement allows those insurers to remain viable, to continue to provide coverage for Floridians and to keep policies out of Citizens,” Insurance Commissioner David Altmaier wrote in his bulletin.
If Weston wants to seek another ratings agency, reports say it could take as much as eight months.
Weston is licensed in 14 states and currently operates in Florida, Texas, Louisiana and Mississippi, the most vulnerable areas to hurricanes. On Dec. 17 of last year, Weston Insurance Company and Weston Specialty Insurance Company merged and incorporated to form Weston Property & Casualty Insurance Company.
Messages left for either of the managers in the Coral Gables office were not returned as of this post.
At least 17 insurance companies in Florida have either: withdrawn coverage; will stop writing future policies; have established caps on potential losses; or have been declared financially insolvent.
Among the reasons cited for the downfall trend: “excessive litigation,” rampant roofing fraud, and rising home repair costs.
Last month, reports surfaced indicating Demotech had conversations with 17 insurers, with the likelihood of those companies facing a downgrade.
Florida’s Chief Financial Officer Jimmy Patronis, along with Altmaier, led a public outcry while concerned about the future of the insurance industry in the state. It prompted Demotech officials to waive off last week’s anticipated release of new downgraded ratings en masse.
Demotech’s philosophy “is to review and evaluate insurers based on their area of focus and execution of their business model rather than solely on financial size,” states a message on its home page.
To see how your property insurance company (if among the 40) is rated by Demotech, visit them online, click here, and type in the company whose grade you wish to see.