Demotech suspends their Florida Insurance rating model and warns that 10 -15 of their 57 rated property insurance carriers writing in Florida will be downgraded.
Okay, what does this mean, and who the heck is Demotech?
To understand who Demotech is and why this is significant, one needs to understand what it means to have an A rated Insurance company.
Before the Florida property Insurance crises, companies were typically rated 'A', 'B', 'C', or not issued a rating by a company called AM Best, a company with the purpose to review insurance carriers and offer an independent review of their finances and operations as it relates to their ability to meet their obligations. If your carrier was not A rated, it was generally unacceptable by Mortgage companies.
After Hurricaine Andrew, most companies left Florida. Those remaining were not "A" rated by AM best, including major companies' subsidiaries like State Farm and Allstate who had formed seperate companies for Florida only.
Demotech is an alternative rating company that came in and in some opinons, gave A ratings to companies that did not earn it. In fact, some Florida companies with demotech A ratings have gone bankrupt. However the mortgage companies generally accepted this rating because, well, these were typically the only companies writing property insurance in Florida and of course they did want to sell mortgages to Florida homeowners. it remains a touchy situation.
Fast forward to 2016 which had volatile weather and has caused Demotech to have concern for some of the 57 carriers they rate. in addition, major court cases unfriendly to insurance companies has caused Demotech to rethink their rating model:
"Recent Florida Supreme Court decisions and ongoing abuse in Florida’s insurance market have led Demotech to change the criteria it uses when rating insurers in the state. The announcement comes as insurers get ready to announce their 2016 annual reports that could indicate unfavorable results for many.....[2016 catastrophes] eroded their surplus and after that had been eroded there was the Johnson and Sebo cases,” he said. “No one is in danger of going under, but that being said we have standards that are higher than just not going under.”
So what does this mean? It means that some property (homeowner) companies are not as financially healthy coming into 2017 as they were in 2016, and Demotech will be publishing a list of these companies they will downgrade.
We will publish that list here when it comes available. While we as an agency have no faith in Demotech's ability to predict financial stability, we do take notice when they downgrade a company. It's as if the teacher in school gives out almost all A grades, but gives one kid a C, it causes one to wonder just how bad the kid with a C performs.
If your company shows up on this list, you may run into issues with your bank accepting it. We are in a position to help you here, because we represent many homeowner Markets. Call us at 352-686-0612 if you find yourself in this situation.
ISU Bauknight Insurance operates two Counties in Florida, Hudson, FL (727) 863-5641 and ISU Bauknight Insurance, 10488 Spring Hill Drive, Spring Hill, Fl 34607 (352)-686-0612. They also offer coverage throughout Florida on their website or by calling them direct.