Two domestic property insurers no longer writing in the state — one by choice, the other forced– are the only two Florida insurers negatively affected thus far by a rating agency’s review of small domestic insurers.
In a May 21 report, actuarial services and rating firm Demotech, which specializes in rating newer insurers including the 60 start-ups in Florida, has affirmed or upped its positive Financial Stability Ratings (FSR) of A and better for some 22 insurers but is still in the process of reviewing the ratings of 36 other insurers.
Demotech has issued no rating for Coral Insurance, which is under state receivership due to financial difficulties. All of Coral’s policies are in the process of being cancelled.
Ohio-based Demotech also has withdrawn the rating of USIC of Florida, a company with about $3.5 million in writings that voluntarily started winding down its business last year after being denied rate increases.
According to Frederick Millan, president of Puerto Rico-based United Surety & Indemnity Co. (USIC), his company started its Florida operation in 2005 and had several good years before deciding last April to stop writing. He told Insurance Journal that mandatory rate reductions and an inability to get rate increases approved by the state led to the run-off decision, which he termed “unfortunate” after the company worked hard to establish itself in the state.
The Demotech FSR rating for People’s Trust, a company the state ordered to stop writing business because it was growing too fast, is among those still under review.
Demotech initiated a review of all domestic carriers in March in light of the state’s overall market difficulties and a projected funding shortfall in state’s backup hurricane insurance fund. Among the issues Demotech has been studying is whether the carriers have contingency plans in the event there is any delay in their repayment from the state hurricane fund after a major storm.
Joseph Petrelli, Demotech president, said additional rating updates will be issued in coming weeks. In a previous interview, Petrelli indicated he expected only about 6 to 10 carriers would see any type of ratings downgrade when the analysis is completed. The firm said it will make updates available on its Web site.
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