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 a complete housing market meltdown. Name calling won’t win you friends or influence people, much less create more affordable insurance options.
Last month, Demotech, Inc., an Ohio-based financial appraisal firm, announced it will offload 17 private insurers operating in Florida. The move prompted a sharp response from state leaders, including counterproductive complaints to federal home mortgage agencies about Florida’s lone property insurance rating agency.
In his letter to Fannie Mae, Freddie Mac and the Federal Housing Finance Agency, Florida Chief Financial Officer Jimmy Patronis called Demotech, Inc. “a tough rating agency,” playing “havoc with the financial lives of millions of Floridians.” This, from a guy who seems more interested in bashing President Biden and the IRS than finding a solution to a crisis that threatens the state’s housing market and the larger economy.
The blowout against Demotech may have bought the state time. The rating agency postponed its originally planned cuts, but complaints from the state’s CFO are no real substitute for a comprehensive policy to keep property insurance viable and affordable.
FOR SUBSCRIBERS:Property insurance market in ‘very precarious position’ as hurricane season approaches
In 2019, Floridians paid $1,988, the average homeowner’s insurance premium. Today, it’s $4,231, according to an 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 state government-backed “last resort” insurer, is quickly becoming the only viable option.
“When the market is healthy, Citizens becomes smaller as private companies take advantage of good market conditions,” Michael Peltier, a Citizens spokesman, told Post reporter Hannah Morse. “When the market is in challenging times, we grow.”
As the state faces the high point of another hurricane season, the stakes couldn’t be much higher. Homeowners who rely on federally backed mortgages need highly rated insurers to meet the insurance requirements of Fannie Mae and Freddie Mac. Lower ratings typically force policyholders to pay more for new coverage, especially for homeowners whose homes are paid for through federally backed mortgages.
Governor Ron DeSantis calls special session to address property insurance crisis
Understandably, Governor DeSantis called a special session of the Florida Legislature to address the crisis. The result was more money set aside for reinsurance to help struggling insurers, a move that got a boost this month when the Florida Office of Insurance Regulation announced plans to create a temporary reinsurance arrangement through Citizens Property Insurance Corp., to strengthened insurers during the current hurricane season.
The deal fills a “waiver” 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 cuts or leave Florida altogether.
Worse, the state’s efforts to address the crisis have not mollified the insurance industry, which still sees climate change and ongoing litigation as factors that make Florida a dangerous place to do business. The special session that produced bills favoring 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 Florida homeowners?
It’s not like the state didn’t see this coming. Large insurance firms that offer bundled home and auto insurance policies in other states abandoned Florida years ago, leaving homeowners here with smaller firms that may be willing to take the risk but have need more help getting reinsurance from the state of florida to do so. .
“I really think the only way to address property insurance is with national catastrophe insurance, similar to what the federal government did with floods,” state Sen. Lori Berman, D-Delray Beach, told the Editorial Board of Mail. “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 so far the only plan seems to be to hope we don’t get a hurricane.
If state leaders, like Patronis, are serious about dealing with property insurance, they’d better take a more proactive approach with the industry and the relevant federal agencies. Clearly, simply reacting to events does not work. Complaining to the latest rating agency won’t help either.
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