Florida property insurance regulators are taking extraordinary action in case rating agency Demotech downgrades numerous Florida carriers
To avoid tens of thousands of homeowners being forced to hunt for new property insurance coverage if rating agency Demotech follows through on threats to downgrade multiple Florida carriers, Florida property insurance regulators are adopting an "unusual" and "exceptional" measure.
On Wednesday, the Insurance Regulation Office in Florida presented a plan to provide Citizens Property Insurance, a state-run company, with reinsurance protection for downgraded companies.
Florida is desperate as a sizable chunk of its homes insurance market teeters on the verge of collapse, as seen by the dramatic move to take on financial responsibility for a slew of struggling insurers.
What would a downgrade of Demotech signify for the Florida property insurance market?
Mortgage behemoths Freddie Mac and Fannie Mae demand that applicants obtain house insurance coverage from a reputable provider. Smaller firms that exclusively receive ratings from Demotech dominate the Florida property insurance market, giving that organization a lot of influence.
David Altmaier, the commissioner of Florida's Office of Insurance Regulation, wrote to Demotech last week to voice his worries about the company's plans to downgrade "about 17" Florida property insurance providers.
In a state where insurers are discontinuing policies and sharply hiking rates for policyholders, downgrading the businesses might lead mortgage lenders to refuse those policies and force homeowners to find alternative coverage.
Announcing the reassurance plan
In announcing the reinsurance plan on Wednesday, Altmaier said, " Ensuring consumers have access to insurance is OIR's top concern, particularly during hurricane season. We have had to take extreme measures to protect millions of consumers because the status of Demotech's ratings is questionable.”
According to a news release from OIR, reinsurance will allow Freddie Mac and Fannie Mae to accept the policies of downgraded companies.
In the release, it is stated that " Both Freddie Mac and Fannie Mae provide an exemption from the financial rating standards for an insurer that is protected by a reinsurer that accepts, by endorsement, the total obligation of the insurer for any covered damage payable but repaid by the insurer due to insolvency.”
According to Gov. Ron DeSantis, using Citizens as a financial safety net for insurers makes sense since, if the companies are downgraded, many of their policies will directly impact the Citizens.
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