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Financial analysis firm declines to lower ratings of Florida property insurers

Mon Mar 20th, 2017 on     Homeowners Insurance,    

An alarm bell was sounded in the insurance sector last month when Demotech, the Ohio-based independent financial analysis firm, indicated that it was strongly considering lowering the financial strength ratings of six to eight Florida homeowners insurance carriers to below an A.

Why this might not seem like too much of a concern to the average person, it was actually rather distressing news to the 250,000 customers of these insurance carriers, as most mortgage lenders — including federal lending agencies Freddie Mac and Fannie Mae — require borrowers to secure homeowners’ insurance from an A-rated insurer as a condition of financing.

Potentially affected homeowners can now rest easier, however, as Demotech recently issued a statement indicating that no reduction in financial strength rating will be forthcoming.

The reason?

According to the firm, several of the affected insurance carriers responded to its call for reinforcement of claims-paying abilities and financial stability by adding nearly $355 million in net worth or claims reserves.

In addition, three of the carriers named by Demotech all avoided ratings downgrades by acquiring new ownership. These included Elements Property Insurance Company, Prepared Insurance Company and Mount Beacon Insurance Company, which collectively insure 111,837 homeowners across the Sunshine State.

As welcome as this news was, the issue appears to be far from resolved. That’s because Demotech, which is still examining both year-end financial reports and reinsurance programs for the 2017 hurricane season, indicated that many uncertainties persist in the Florida market, including:

  • Florida Supreme Court decisions reversing claims protocols, practices and procedures that are standard practice elsewhere
  • Excessive turmoil (large claim volume, pending lawsuits, legislative debate, etc.) concerning assignment of benefits clauses

It will be interesting to see how all this plays out in the months ahead, especially in relation to the ongoing AOB debates in Tallahassee.

Stay tuned for developments …

If you have questions or concerns related to denied or delayed claims under a homeowners’ insurance policy, consider speaking with a skilled legal professional.

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