Looming ratings downgrades for six to eight Florida-based property insurers could affect about 250,000 policyholders statewide, forcing some to find new insurers, according to sources familiar with an advisory issued this week by ratings agency Demotech.
The company, whose Financial Strength Ratings (FSNs) determine which insurers are acceptable to lenders of mortgages backed by Fannie Mae and Freddie Mac, also announced that two state Supreme Court rulings that went against insurers in 2016 prompted it to suspend the standards by which it rates 57 Florida insurers.
The rulings, along with increased claims costs blamed on the Assignment of Benefits repair clause, have “revised claims procedures, practices, and protocols from the industry standards that previously existed to a ‘Florida only’ standard,” Demotech said in the Feb. 6 advisory.
The Ohio-based national ratings firm said it will continue to analyze and rate companies as in the past, “but we will need to do so with a focus on the carriers’ responses to the challenges faced by AOB and the [two Supreme Court cases] in the execution of their business plans.”
