TAMPA BAY, Fla. — In the first week of August, four Florida property insurance companies had their ratings withdrawn on the rating agency Demotech’s database and one of those is now in liquidation.
Weston Property & Casualty Insurance is the fifth property insurance company operating in Florida to go into receivership this year.
According to the Florida Chief Financial Officer’s (CFO) website, Weston entered liquidation on August 8. This leaves its 20,000 customers just 30 days to find new insurance and all existing claims will be transferred to the Florida Insurance Guarantee Association.
The CFO website states, "On August 8, 2022, Weston Property & Casualty Insurance Company was ordered into receivership for purposes of liquidation by the Second Judicial Circuit Court in Leon County, Florida. The Florida Department of Financial Services is the court-appointed Receiver of Weston Property & Casualty Insurance Company."
Weston and FedNat insurance were the first companies to lose their financial stability ratings from Demotech after reviewing reinsurance packets for the 2022 hurricane season.
Documents show that FedNat has transferred 78,000 policies to its subsidiary, Monarch National Insurance Company, and dropped all remaining policies.
According to our records, FedNat had about 152,000 policies before they filed for rehabilitation in receivership in May. They dropped 68,000 homeowners and continued operating.
Bankers Specialty and Community First are the other two companies that now have an NR or “no rating” from Demotech. Their parent company, Bankers Insurance Group, tells us that they voluntarily withdrew their rating.
In a statement, they said, “We proactively withdrew our ratings from Demotech over lingering concerns about the company's methodologies. AM Best is the largest global rating agency for the insurance industry. Bankers Insurance Group holds an AM Best Financial Strength Rating (FSR) that exceeds the requirement for mortgage lenders Fannie Mae and Freddie Mac.”
“Bankers is already rated by global rating firm AM Best. They have a B++ rating, which qualifies all of their policyholders for federally backed mortgages,” Mark Friedlander with the Insurance Information Institute explained. “This is going to be a seamless process for the customers. It will make no difference in the way they're covered.”
However, Bankers announced in July that it will no longer be writing homeowners insurance in Florida — only commercial lines, builders risk, rentals, and flood policies.
We also talked with representatives from the AM Best rating agency to ask them why they only rate some Florida companies and not others.
They told us in a phone conversation that they have specific criteria and “some companies may not be as financially sound as they make themselves out to be and be hesitant to come to a rating agency such as AM Best,” said Jeffery Mango, managing director of strategy and communications for the agency.
Federal loans such as Freddie and Fannie will accept insurance from a company rated “B” or better by AM Best and only an “A” from Demotech.
For homeowners with United Property And Casualty Insurance (UPC), who were downgraded to an “M” or moderate… they are still in compliance with federal loans as well. UPC opted into the Florida Office Of Insurance Regulation’s (OIR) reinsurance program with Citizens Property Insurance which gives them the necessary financial backing.
As stated on the OIR website, “the temporary market stabilization arrangement is a substitute for an acceptable financial stability rating for policies with mortgages backed by Fannie Mae and Freddie Mac. The arrangement provides that if an insurer is covered by a reinsurer who assumes, by endorsement, 100 percent of the insurer’s liability or any covered loss payable, but unpaid by the insurer, for reason of insolvency, it meets the exemption requirements for Fannie Mae and Freddie Mac.”
Other property insurance companies that went into receivership this year and are in liquidation are Avatar, Southern Fidelity, and Lighthouse (in Louisiana).