In another sign of problems in Florida’s property-insurance market, a financial-ratings agency has withdrawn ratings for two insurance companies and downgraded another company.
The Demotech agency on Monday withdrew financial-stability ratings for Weston Property & Casualty Insurance Co. and FedNat Insurance Co., according to Demotech’s website. It also changed United Property & Casualty Insurance Co.’s rating from “A Exceptional” to “M Moderate.” The Insurance Journal reported the ratings changes Tuesday morning.
Signs had emerged earlier of financial problems at FedNat and United Property & Casualty. FedNat reached an agreement in May with the state Office of Insurance Regulation that called for it to cancel policies and shift other policies to an affiliated company, Monarch National Insurance Co. Monarch has an “A Exceptional” rating from Demotech.
Also, United Property & Casualty said last month that its board had started a “review of its strategic and capital raising alternatives” that could include moves such as a sale. Financial ratings are important, in part, because mortgage-industry giants Fannie Mae and Freddie Mac require homes to be insured by financially sound companies. For insurers rated by Demotech, Fannie Mae and Freddie Mac require “A” ratings or better. Florida regulators scrambled in July after Demotech indicated it could downgrade about 17 insurers to a level that would not meet Fannie Mae and Freddie Mac standards.
The Office of Insurance Regulation on July 27 announced a stopgap plan to try to make sure homeowners can maintain coverage. The plan involved the state’s Citizens Property Insurance Corp. acting as a financial backstop. Citizens would take on a reinsurance role to help make sure claims get paid if private insurers go insolvent.
Demotech last month did not publicly identify the companies that it was looking at downgrading, so it was not immediately clear Tuesday whether Weston Property & Casualty, FedNat and United Property & Casualty were part of the potential 17 insurers.