Florida Office of Insurance Regulation to establish temporary reinsurance arrangement to prevent crisis
MIAMI – The Florida Office of Insurance Regulation (OIR) announced a plan to establish a temporary reinsurance arrangement to prevent an insurance crisis in the state after news that carriers could soon be downgrades.
"Citizens is the state's insurer of last insurance resort, so we are set up to expand when the market experiences challenging time," said Michael Peltier with Citizens Property Insurance Corporation.
The state-backed insurer isn't just expanding to cover more residents who cannot get insurance through another carriers, but to the insurance company themselves facing rating downgrades because of their viability.
"If those companies should have their rating downgraded those policy holders would still be able to stay on their regular policy and Citizens would step in if needed to back up those firms in case they needed help," added Peltier.
The move was announced Wednesday by the state's Office of Insurance Regulation in response to news that Demotech, the company that rates insurance carriers, could soon issue massive rating changes from "A" unsurpassed to "S" for Substantial or "M" for Moderate.
"Demotech announced it was possibly considering downgrades to about 17 companies that sent concern through the industry because if someone those files were downgraded, they may have trouble maintaining their requirement for their mortgages," says Peltier.
That means homeowners with an insurance company that is rated less than an "A" would be forced to find new coverage at possible higher rates. It's news that has some like Ernesto Cortez on edge.
"My insurance company went insolvent, and my policy went from $2,000 to $5,000. And it took me a long time to find a company that would even service me," said Cortez, who is mortgage loan originator.
And he adds if Citizens didn't step in, other homeowners will be in a similar situation. But he warns this solution is not a silver bullet.
"It's a Band-Aid because Citizens is over exposed, and while they have to accept everyone initially there going to try to push people to different insurance companies," added Cortez.
Still, Citizens says the move makes them a safety net of the industry. And while rates can fluctuate, the change will not have an immediate impact on current Citizen's customers.