Florida Insurers Are Staring Down A Ratings Downgrade

Demotech, the agency responsible for creating financial stability ratings (FSR) announced that they plan to downgrade the ratings of at least 40 domestic insurers in Florida. The company cited a deteriorating property insurance market in the state as the primary reason behind the downgrades.

While 40 insurers have been warned, it’s unlikely that more than a few dozen will actually have their ratings downgraded. A source inside Demotech told the Insurance Journal that they expect “…two to four downgrades by the end of January and then another four to six by the end of March.”

The truth is there are a lot of factors that have led to the deteriorating conditions that the Florida property insurance market faces today. Demotech President Joe Petrelli spoke with the Insurance Journal about some of the primary factors that led to the recent downgrades.

Petrelli cites “Judicial decisions that Demotech says have revised the claim settlement landscape…insurer investor capital appears to be exiting rather than entering Florida…” and “The rising cost of reinsurance in in 2019,” as some of the primary factors that contributed to the current situation.

Luckily for Florida residents, it’s not all bad news. Demotech went on to suggest several possible actions that could help remedy the state of the Florida property insurance market. According to the report, the following actions will help:
“Submission to OIR of a well-documented and thorough filing to “true up” their reinsurance costs. A marked and immediate decrease in the interest rate applicable to the accumulated debt in their holding company Securing actuarially sound rates at the earliest possible date Access to sufficient capital to move loss and loss adjustment expense reserves to an adequate level.”

While the Florida property insurance market can be fixed, it won’t happen in time for the FSR downgrades that are coming to several Florida insurers in the near future. If the Florida market does not begin working to remedy the situation, more downgrades are inevitable.


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