You’d think state leaders would choose their words more carefully when addressing the only property insurance rating agency standing between our insurance crisis and the complete collapse of the housing market. Name calling won’t win friends or influence people, much less create more affordable insurance options.
Last month, Demotech, Inc.an Ohiobased financial ratings firm, announced that it would downgrade 17 private insurers operating in Florida. The move drew a backlash from state leaders, including counterproductive complaints to federal home mortgage agencies about of Florida single property rating agency.
In his letter to Fannie Mae, Freddie Macand Federal Housing Finance Agency, Florida Chief Financial Officer Jimmy PatronusNamed Demotech, Inc. “a red-handed rating agency” playing “havoc in the financial lives of millions of Floridians.” This from a guy who seems more interested in banging President Biden and on IRS than finding a solution to a crisis that threatens the state’s housing market and the larger economy.
The rant against Demotech may have bought the state time. The rating agency delayed originally planned downgrades, but the government’s CFO’s whining is no real substitute for a comprehensive policy to keep property insurance viable and affordable.
FOR SUBSCRIBERS: Property insurance market in ‘very uncertain position’ as hurricane season approaches
In 2019, Floridians paid up 1988 dollars, the average homeowners insurance premium. Today is 4231 dollarsaccording to art Insurance Information Institute analysis. Property and casualty companies that still offer homeowners insurance continue to face the threat of liquidation. As a result, Citizens Property Insurance Corp.the government-backed insurer of ‘last resort’ is fast becoming the only viable option.
“When the market is healthy, citizens become smaller as private companies take advantage of good market conditions,” Michael Peltiera Nationals spokesman told a Post reporter Hannah Morse. “When the market is in tough times, we grow.”
As the state faces the peak of another hurricane season, the stakes couldn’t get much higher. Homeowners relying on federally-backed mortgages need highly rated insurers to meet Fannie Mae and Freddie Mac insurance requirements. Lower ratings typically force policyholders to pay more for new coverage, especially for homeowners whose homes are paid off with federally backed mortgages.
manager Ron DeSantis convenes a special session to address the crisis in property insurance
of course, Governor DeSantis convened an extraordinary session of Florida Legislature to deal with the crisis. The result was more money set aside for reinsurance to help struggling insurers, a move that was reinforced this month when Florida Office of Insurance Regulation announced plans to create a temporary reinsurance arrangement through Citizens Property Insurance Corp.to strengthen insurers during the current storm season.
The agreement meets an “exemption” that allows struggling insurers to obtain reinsurance, money that would allow them to provide coverage and meet requirements for federally-backed mortgages. Unfortunately, the exemptions won’t help much if Demotech is forced to make more downgrades or exit Florida generally.
Worse, the state’s efforts to deal with the crisis have not mollified the insurance industry, which still sees climate change and ongoing litigation as factors Florida risky place to do business. The special session, which produced bills that favor the insurance industry over consumers, was met with a collective “meh” from the industry.
FOR SUBSCRIBERS: Will the latest property insurance legislation go far enough to help of Florida home owners?
It’s not like the state didn’t anticipate this. Major insurance companies that offer bundled home and auto insurance policies in other states have been left behind Florida years ago, leaving homeowners here with smaller firms that may be willing to take on the risk but need more help getting reinsurance from the state Florida to do it.
“I really think the only way to address property insurance is with national catastrophe insurance, similar to what the federal government did with floods,” the state senator said. Lori BermanD-Delray Beach told the Post editorial board. “I hope the reinsurance band-aid works, but I’m not convinced.”
Whether the solution is market driven or government driven remains to be seen. But for now, the only plan seems to be to hope we don’t get a hurricane.
If state leaders like Patronis are serious about property insurance, they’d better take a more proactive approach with the industry and relevant federal agencies. Clearly, simply reacting to events does not work. Whining about the last existing rating agency won’t help either.
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