Company downgrades 3 insurers in Florida, adding to concerns

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TALLAHASSEE, Fla. (AP) — A rating agency has stripped the ratings of two insurance companies and downgraded a third company in Florida, raising concerns for homeowners who could end up paying more for insurance and further cloud a market in trouble.

Demotech, which rates 40 Florida-based insurance companies, on Monday withdrew the financial stability ratings of Weston Property & Casualty Insurance Co. and FedNat Insurance Co. and changed the rating of United Property & Casualty Insurance Co. from “A Exceptional” to “M Moderate.” The changes were first reported by the Insurance Journal.


The measures follow reports last month that Demotech planned to downgrade 17 to 27 insurers from an A rating to ratings of S, for substantial, or M. In response, the Florida Office of Insurance Regulation said that the state-created citizens’ property insurance Corp. would provide reassurance to companies that Demotech planned to downgrade.

Citizens Property Insurance Corp. was created to provide insurance for homeowners who cannot find policies from private companies, and it will ensure that companies will be able to pay claims. Otherwise, homeowners with mortgages from Fannie Mae and Freddie Mac would have had to seek new policies.

Federal mortgage guarantors Fannie Mae and Freddie Mac require borrowers of loans they back to maintain insurance coverage with A-rated insurers. Borrowers with insurance backed by companies rated below A could end up in default on the terms of their home loan. If that were to happen, then Fannie Mae and Freddie Mac could order mortgage managers to get more expensive coverage from acceptable insurers on the home loans they service.

In a bulletin for insurance agents posted on its website, Citizens said on Tuesday it was “ready to help carriers in the event of a rating downgrade by Demotech.”

A spokeswoman for the Florida Office of Insurance Regulation said in an email Wednesday that United Property & Casualty Insurance Co. has qualified to participate in the settlement with Citizens Property Insurance Corp.

The Florida home insurance market has suffered losses in recent years, and some major carriers have stopped underwriting home insurance policies in the state. Some industry experts believe that the legislative reforms enacted over the past two years have not been enough to restore the health of the overall state insurance market.

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