The state's volatile insurance market was rattled again this week after rating agency Demotech signaled it would downgrade the Financial Stability Ratings (FSR) of at least 17 property insurers, potentially impacting millions of Floridian homeowners.
Among other things, the FSR affects what kind of home loans buyers can obtain and some insurers can write policies only with the highest rating.
Florida Association of Insurance Agents (FAIA) posted on its website Thursday: "Here we go again. In documents obtained by FAIA, Demotech has notified multiple carriers of their intent to downgrade the company's rating from 'A Exceptional' to 'S Substantial.' Also included was a press release dated July 26, 2022, attempting to explain Demotech's role in the Florida market, recent events, and legislative reforms, and stating that all 'carrier Financial Stability Ratings (FSRs) have now been updated' on their website. Yet another chapter in Demotech's tumultuous saga of rating Florida's domestic insurance market is about to unfold."
Florida Office of Insurance Regulation (OIR) commissioner David Altmaier indicated that approximately 17 Florida domestic property insurance had received notice of downgrade from Demotech president Joe Petrelli.
Altmaier urged Petrelli to communicate its rating standards and methodology prior to the ratings becoming effective.
"As it stands, Demotech has not provided companies a meaningful path for review or appeal of these ratings and has been inconsistent in its application of its own posted methodology," Altmaier wrote in a letter to Petrelli on July 21.
Florida's Chief Financial Officer Jimmy Patronis described Demotech as a "rogue" ratings agency in a July 21 letter to the director of the Federal Housing Finance Agency.
Patronis asks FHFA director Sandra Thompson to reconsider its reliance on Demotech as the primary ratings agency for rating the strength of the state's domestic insurance market "and to give Florida leaders time to identify a suitable alternative ratings body to evaluate the financial strength of Florida insurers."
"I am writing out of concern that underwriting guidelines at Fannie Mae/Freddie Mac (GSEs) have inadvertently empowered a rogue ratings agency, Demotech, Inc. (Demotech) to play havoc with the financial lives of millions of Floridians," Patronis wrote.