Rating agency delays plan to downgrade 27 Florida-based property insurance companies

TALAHASSEE – CBS4 has learned that a rating agency’s plan to downgrade 27 of 40 Florida-based property insurance companies has been delayed.

It’s a move that could leave millions of homeowners across the state paying more, even leaving some scrambling to find a new insurer.

“A very dramatic impact on the market here, the real estate market, the housing market, everything,” said Alex Ray, director of marketing and sales for John Galt Insurance.

“It’s kind of a nightmare, quite frankly,” added Parkland resident Gordon Light.

He has lived in Parkland for nearly three decades. Recently, two different insurance companies dropped it in the past year, including Citizens, a public company.

“All of a sudden I get a termination notice, a cancellation, and I’m leaving, are you serious,” Light added.

Several insurers have canceled his property insurance and he also pays thousands of dollars more every year in insurance premiums.

“I don’t know what needs to be done, but something needs to be done,” Light said.

John Galt Insurance connected Light to land a new policy.

And depending on the outcome, Ray expects the need to grow into the millions in Florida.

But that’s not the worst.

“The harsh reality is that people will have to sell their homes because they can’t afford the insurance,” Ray said.

It’s a grim outlook based on projections that Demotech will downgrade the financial stability scores of 27 insurers to an “S” for substantial or “M” for moderate.

Overview: If your mortgage lender is federally backed by Fannie Mae or Freddie Mac, they won’t accept anything less than an “A” rating.

Ray adds that people would then be in danger of defaulting on their home loans.

“Forced to find other insurance in this market or force insurance from their lender,” Ray said.

Ray says mortgage company-mandated insurance tends to be more expensive and offers less coverage.

And with less qualified insurers, “trying to add all these policies that need to be rewritten is not an option,” Ray continued.

State Representative Danny Perez says he understands the financial burden homeowners face.

“Anything that could potentially increase home insurance market rates is of concern to us,” Perez said. “It should be.”

He mentions that this is why a law was passed in a special session in May to solve this problem.

“It’s disheartening to see the market trending in the wrong direction,” Perez said.

The addition of lawmakers understood that it would take Floridians 18 to 24 months to see positive change. Consider reinsurance fund for carriers to reduce costs for owners.

“Carriers using this assistance fund will be required to reduce premiums using these specific carriers,” Perez added.

As for how many carriers will remain solvent, that remains to be seen. Ray estimates a few more will collapse in 2022. He says Florida insurance companies reported more than $1.5 billion in losses last year alone.

Ray also told CBS4 that Florida is asking federal loan guarantors to recognize Demotech’s “S” rating.

He adds that it would help the insurance market and the average homeowner in Florida.

Demotech was due to release the ratings on Tuesday, but CEO Joe Petrelli said pressure from state officials delayed until further notice.

In a one-page letter, Petrelli wrote, “While we are unable to provide a specific release date, we are working to expedite the publication of our rankings as soon as possible.”

A source told CBS4’s Joe Gorchow that a more in-depth response to Insurance Commissioner David Altmaier will still be available on Tuesday.

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Kristan F. Talley