New downgraded ratings are expected to be released for Florida insurance companies, impacting whether or not they remain federally backed.
The company that rates insurance companies in Florida on their ability to fulfill loans, Demotech, was expected to release its new ratings on Tuesday. For insurance companies to be federally backed, they must have an “A” rating. 27 of the Sunshine State’s 40 insurance companies are expected to receive a downgraded rate, leaving millions of Floridians scrambling to find a new policy with a federally backed company.
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That release was delayed, leaving insurance brokers and homeowners in a lurch.
So why are these companies facing a downgraded rating in the first place? Florida leads the nation in insurance litigation.
“Florida has about eight percent of all the claims in the country,” William Trump, president and CEO of Trump Insurance, said. “When you think about that, ahh that’s kind of average. [Florida has] 75 percent of all the insurance litigation… It doesn’t take long until that erodes the entire market.”
Trump said he’s often having bad conversations with clients, worried about where that leaves them.
“Obviously Demotech delayed the downgrading — these companies already received letters of the downgrading,” Trump said. “It’s not as though this isn’t going to happen or if it’s going to happen. It’s definitely when.”
Trump’s insurance companies have clients in Largo and St. Petersburg. He says right now 92 percent of the policies his company writes are to Citizens Property Insurance Corporation.
Citizens is considered a last-resort company for homeowners who could not obtain insurance elsewhere.
“There are not a lot of new carriers dipping their toes into the market because they know it’s a broken system right now,” Trump said. “In my opinion, until we get this fixed, there’s not a lot of good solutions other than citizens. From that standpoint, my agency has written more policy into Citizens in the last six months than the last six years.”
Trump worries if a massive storm were to come through Florida, a lot of companies would not have the funds to fulfill the claims they’d receive.
We’re in the middle of Florida’s hurricane season. With that in mind, Trump said elected officials are hoping new ratings aren’t released until the season ends. If that were to be the case, the companies that currently have “A” ratings would keep those ratings and remain federally backed, ensuring homeowners would be paid out for their claims.
“I think there’s a lot of pressure from the state of Florida saying ‘please withhold this information,’ because it’s essentially a nuclear bomb for our market,” Trump said.
If Demotech releases its ratings, millions of Floridians would be in the market for a new home insurance policy. But would there be room?
“No. Absolutely not,” Trump said.
While Citizens is a last-resort option, if it becomes everyone’s option, they’ll have to turn away new policies.
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