Feb. 14--Ratings firm Demotech says its guidance on 57 Florida-based property insurers is under review in the wake of the 2016 storms and continuing water-claims problems. But officials are not saying publicly how many how many companies are likely to get lower financial safety grades in March.
Ohio-based Demotech plays a key role in rating Florida-based insurers for mortgage lenders, including smaller insurance companies not necessarily rated by older, traditional agencies.
Demotech officials fielded multiple questions in a conference call Friday about whether they expect mortgage lenders to accept policies from insurance companies who get less than an A rating when approving loans.
"The short answer is I don't know," said Demotech president Joe Petrelli.
There were hints that newer grades will amount to a B-plus, or B double prime, which Petrelli compared to "getting an 88 or 89 on a test." It doesn't mean they are failing, but they might need to do a little better to get an A, he said.
In some cases, that might mean companies need to raise additional capital as a cushion against future losses in order to keep a higher grade.
Whether that means four companies are at particular risk, or eight to 10 or more, has not been clarified in public statements.
Also unclear is whether uncertainty about 57 insurers in the state will cast a pall over Florida domestic insurers as a group and drive more consumers to state-run Citizens Property Insurance Corp. Though Citizens isn't designed to market itself and seek more customers, the state's carrier of last resort has a $7 billion-plus surplus, bigger than any domestic, and a 10 percent annual cap on rate increases.
Citizens officials have indicated they expect to add customers in 2017 to rise back above 500,000 policies, following years of reductions.
Big national companies are typically writing little or no new business in South Florida.
The Florida Property & Casualty Association, representing a number of state-based companies, said the guidance reinforces industry calls for state legislators to take action on what they call abusive non-hurricane claims in South Florida from things like plumbing leaks. Contractors, attorneys and others say some proposals represent an overreach by insurers to weaken consumer rights to representation.
"Ratings agency Demotech recently issued a press release advising they are making changes in the way they evaluate home insurance companies in Florida," an FPCA statement said. "This reflects their view of the state's property insurance market which is deteriorating because of claim fraud, assignment of benefits abuse, and one way attorney fees. The FPCA shares Demotech's view and continues to call upon the legislature to do something about it."
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