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Insurance ratings agency says 9 Florida insurers must improve performance

While all were rated ‘A’ for ‘exceptional,’ Demotech Inc. said they must take significant steps going forward.
From left: Lee Cathey, Mayor Al Cathey and Charles Smith survey damage in the coastal township of Mexico Beach, which lay devastated after Hurricane Michael made landfall there. [DOUGLAS R. CLIFFORD  |  Times (2018)]
From left: Lee Cathey, Mayor Al Cathey and Charles Smith survey damage in the coastal township of Mexico Beach, which lay devastated after Hurricane Michael made landfall there. [DOUGLAS R. CLIFFORD | Times (2018)]
Published Mar. 17
Updated Mar. 17

For the second year in a row, ratings agency Demotech Inc. said several Florida insurers would need to improve their finances to maintain stability going forward.

Demotech is a private company that grades most Florida insurers on their financial health. It finished its most recent ratings period this month, affirming all but one “A” grade, which is considered “exceptional.” The company it did not reaffirm is a commercial insurer that asked for its rating to be withdrawn earlier this year.

Nine companies, the firm said, need to continue to bolster their finances to maintain that rating going forward.

Florida property insurers have faced significant financial challenges over the past year as reinsurance rates rocketed, claims from Hurricanes Irma and Michael lingered and rising legal costs persisted. The state insurance regulator launched a review of many Florida insurers’ finances to look for ways they could improve.

Six property insurers took steps to improve their finances since the end of 2020 but need to go even further to maintain their “A” rating in the future.

These include Cypress Property & Casualty Insurance Co., its affiliate Access Home Insurance Co., Avatar Property & Casualty Insurance Co., Lighthouse Property & Casualty Insurance Co., its affiliate Lighthouse Excalibur Insurance Co. and St. Johns Insurance Co.

While Demotech did not say which specific steps each insurer took, it listed general remedies Florida insurers have taken overall, such as seeking outside investments, reevaluating an insurer’s business model, revising the underwriting for current business and canceling or shedding policies that bring particularly high reinsurance costs.

Three other companies took similar but smaller steps, Demotech said, including Olympus Insurance Co., Gulfstream Property and Casualty Insurance Co., and Gulfstream Select Insurance Co.

Last year, Demotech said it was considering ratings downgrades for almost half of insurers it rated in Florida.

In a release, the ratings agency pointed to continued issues with litigation over repairs unrelated to storms as one of the main drivers of instability in the market.

“There is a need for meaningful and substantive tort reform,” the company said.

Related: Several Florida property insurers face ratings downgrade