Editorial l Lawmakers to look for ratings alternatives

The property insurance market in Florida is in turmoil, as property owners know first-hand. Unfortunately, state leaders are busier looking for someone to blame than focusing on a fix.

Already this year, five property insurers have been deemed insolvent and others, trying to remain in business, are refusing to renew policies – which is sending homeowners scrambling to find new insurance. And if the financial ratings of some companies still operating in Florida are downgraded, even more insureds will be on the hunt because federally backed mortgages require insuring with an "A" rated company.

So in the middle of hurricane – and election – season, Gov. Ron DeSantis and CFO Jimmy Patronis, both of whom are running for re-election, have tried to deflect ill will by blaming someone else. (Standard political tactic: make people look elsewhere; unite people against a supposed common enemy.)

Who are they blaming? Demotech, a financial ratings company that has been acknowledged since 1990 by federal mortgage-backers Freddie Mac and Fannie Mae.

Kevin McCarty, Florida's insurance commissioner until 2016, was direct and on point with his criticism of this move. In a recent published column, he wrote, "Unfortunately, a company that rates the financial strength of insurers has become a target of those who unfairly blame the ratings organization for contributing to market turmoil."

McCarty notes that Demotech, which has evaluated the financial strength of property insurers for decades, "does a thorough and professional job, using sound actuarial principles and a detailed methodology to determine financial stability ratings for hundreds of companies doing business in Florida."

In a supreme demonstration of political posturing, Patronis called Demotech "a rogue agency" and accused the company of being "woke." Cue the political dog-whistles.

As if this weren't already a pocketbook issue, here's one more layer. A legislative committee has allocated $1.5 million in taxpayer dollars for a consultant to "explore alternative methods and develop options" for property insurance companies "to acquire a financial rating satisfactory to federal mortgage standards." In other words, come up with a scheme – even if the state creates the program itself – that will allow companies not performing to top financial standards to be graded as "A" firms anyhow.

Think about it: If a catastrophe occurs, will these re-labeled insurance firms be able to meet the challenge?

Reports have noted that, as national insurance carriers have scaled back, Florida has relied instead on newer firms with fewer resources. Market instability began in 1992 when the devastatingly expensive Hurricane Andrew scoured southern Florida, after which a number of property insurance firms disappeared. It has only gotten worse. One day's work in a special session after the 2022 legislative term absolutely did not solve a problem that has been years in the making.

State leaders should be spending time and taxpayer money on stabilizing the property insurance market. The ratings agency is not the problem, the market is. Just fix it. Don't shoot the messenger.