What is Demotech?
Demotech, Inc. is an Ohio-based consulting firm that provides financial ratings for property and casual insurance companies. These ratings assist property owners when selecting from insurance companies. Demotech began rating Florida insurers after Hurricane Andrew made landfall in 1992 and caused billions of dollars in property damage. Demotech offers ratings to express how solvent an insurance company is. Generally speaking, when Demotech downgrades a property insurer, it is usually a precursor to the potential of insolvency or insufficient reserves to pay outstanding claims. As such, it has become the dominant rating system for most Florida insurers.
What are Demotech’s Financial Ratings?
Demotech provides financial ratings to insurance companies of all sizes. The following are their financial stability ratings:
- A″ (A Double Prime), Unsurpassed: Insurers earning this rating possess unsurpassed financial stability related to maintaining surplus; furthermore, 100% of the insurers receiving this rating are expected to have positive surplus as regards policyholders as of 18 months from the initial date of rating assignment.
- A′ (A Prime), Unsurpassed: Insurers earning this rating possess unsurpassed financial stability related to maintaining surplus; furthermore, 99% of the insurers receiving this rating are expected to have positive surplus as regards policyholders as of 18 months from the initial date of rating assignment.
- A, Exceptional: Insurers earning this rating possess exceptional financial stability related to maintaining surplus; furthermore, 97% of the insurers receiving this rating are expected to have positive surplus as regards policyholders as of 18 months from the initial date of rating assignment.
- S, Substantial: Insurers earning this rating possess substantial financial stability related to maintaining surplus; furthermore, 95% of the insurers receiving this rating are expected to have positive surplus as regards policyholders as of 18 months from the initial date of rating assignment.
- M, Moderate: Insurers earning this rating possess moderate financial stability related to maintaining surplus; furthermore, 90% of the insurers receiving this rating are expected to have positive surplus as regards policyholders as of 18 months from the initial date of rating assignment.
- L, Licensed: Insurers earning this rate are licensed by state regulatory authorities. The evaluation of their financial stability excludes them from assignment to a financial rating.
- NR, Not Rated: Insurers do not currently have a financial stability rating.
- N/A, Ineligible: Insurers are not eligible for a financial stability rating because the complete financial data was unavailable.
Demotech Downgrades the Financial Rating of Three Florida Insurance Companies
As of August 1, 2022, Demotech downgraded United Property & Casualty Insurance (UPC) from an “A” to an “M”.” Weston Property & Casualty Insurance Company’s rating was withdrawn after previously holding an “A”. Similarly, Federated National, or FedNat’s rating was withdrawn after previously downgrading from an “A” to an “S.”
A rating less than an “A” disqualifies homeowners from receiving Fannie Mae and Freddie Mac mortgage loans. However, the Florida Office of Insurance Regulation (OIR) took emergency action and established a temporary reinsurance arrangement with Citizens Property Insurance to financially back any company that’s rating was downgraded in an effort to avoid issues with these Fannie Mae and Freddie Mac loans.
Weston Property & Casualty Insurance Company Goes Insolvent
Unfortunately, Demotech’s withdrawal of Weston’s rating wasn’t enough to save the company, and yesterday it was announced that Weston is insolvent, making them the fifth property insurance company to be dissolved in Florida this year.
If you own a homeowners’ insurance policy with Weston, you will likely be receiving correspondence shortly indicating that your policy is set to terminate in the next thirty days. It is imperative you speak with your insurance agent to timely provide you an alternative insurance carrier to avoid a lender-placed insurance policy being taken out by your mortgage company on your behalf.
Contact the Gelber Law Group for more information
Living with property damage can be stressful, and the insurance claim process can belengthy. If you encounter property damage and your insurance claim has been wrongfully deniedor underpaid, contact Gelber Law Group, PA to assist you with a free consultation at 954-320-0100.
