TALLAHASSEE – CBS4 has learned a ratings agency plans to downgrade 27 of the 40 Florida-based property insurance companies.
It’s a move that could leave millions of homeowners statewide paying more, even leaving some scrambling to find a new insurer.
“Very dramatically impact the market down here, the real estate market, the housing market, everything,” said Alex Ray, Director of Marketing and Sales for John Galt Insurance.
“It’s kind of nightmare, quite frankly,” added Parkland resident Gordon Light.
He’s lived in Parkland for nearly three decades. Recently, two different insurance companies dropped him in the past year, including state-run Citizens.
“All of the sudden, I get a termination notice, cancellation, and I go, are you serious,” added Light.
Multiple insurers have canceled his property insurance, and he’s also been paying thousands more annually in insurance premiums.
“I don’t know what needs to be done, but something needs to be done,” said Light.
John Galt Insurance connected Light to land a new policy.
And depending on the outcome, Ray expects the need to grow by the millions in Florida.
But that’s not the worst part.
“The harsh reality is people will have to sell their houses because they can’t afford the insurance,” mentioned Ray.
It’s a grim outlook based on projections that the firm Demotech will downgrade financial stability scores for 27 insurers to an “S” for substantial or “M” for moderate.
Big picture: If your mortgage carrier is backed federally by Fannie Mae or Freddie Mac, they won’t accept anything less than an “A” rating.
Ray adds people would then be in danger of defaulting on their home loans.
“Forced to find alternate insurance in this market or take force-place insurance from their lender,” said Ray.
Ray says mortgage company force-placed insurance tends to be more expensive and provides less coverage.
And with less qualified insurers, “trying to add all these policies that need to be rewritten is not a feasible solution,” continued Ray.
State Rep. Danny Perez says he understands the financial burden homeowners face.
“Anything that could potentially raise the rates for the homeowners” insurance market is concerning for us,” stressed Perez. “It should be.”
He mentions that’s why legislation was passed in a special session in May to address this problem.
“It’s disheartening to see the market trend in the wrong direction,” said Perez.
Adding lawmakers understood it would take 18 to 24 months for Floridians to see positive change. Eyeing the reinsurance fund for carriers to reduce costs for homeowners.
“Those carriers that use this assistance fund will have to decrease the premiums using those specific carriers mandatorily,” added Perez.
As to how many carriers will remain solvent remains to be seen. Ray estimates a few more to go belly up in 2022. He says insurance companies in Florida reported more than 1.5 billion dollars in losses last year alone.
Ray also told CBS4 that Florida is appealing for federal loan guarantors to recognize the “S” rating from Demotech.
He adds this would help the insurance market and the average homeowner in Florida.
Demotech was set to release the ratings on Tuesday, but CEO Joe Petrelli said pressure from state officials has that delayed until further notice.
In a one-page letter, Petrelli wrote, “While we are unable to provide a specific date for release, we are working to expedite the release of our ratings as soon as possible.”
A source told CBS4’s Joe Gorchow a more thorough response to Insurance Commissioner David Altmaier will still be forthcoming Tuesday.
The housing crisis is leaving many desperate for help. That’s why CBS News Miami wants to share your stories to show the crisis you’re in or how you navigated the system. We will highlight these issues and work to get answers and solutions. Send us an email: housing@cbs.com.
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