One rival rating agency took issue with the downgrade, giving several reasons it believes Florida Family Insurance Company is no less financially stable
Florida Family Insurance was downgraded due to underwriting performance (Credit: Unsplash)
Florida Family Insurance Company has seen its financial strength rating downgraded by AM Best from “excellent” to “good” after hurricanes, water-related claims and a failure to reserve sufficiently dragged down underwriting performance.
Also downgraded was the company’s long-term issuer credit rating, a measure of how able an insurer is to meet its financial commitments — this was also reduced from “excellent” to “good”.
According to the ratings giant, a competitive market in the area of wind coverage, where Florida Family is particularly active, contributed to a decline in premiums in recent years, other than a “slight uptick” in 2019.
A statement published alongside AM Best’s rating said: “The downgrades reflect deterioration in underwriting results in recent years that has resulted in performance metrics no longer supportive of a strong assessment.
“The business profile assessment reflects Florida Family’s limited operating territory within a hurricane-prone state.
“Severe weather events continue to be Florida Family’s primary risk, which is a focal point in the group’s enterprise risk management (ERM) programme.”
According to AM Best, the Floridian insurer has taken steps to improve its underwriting performance, including rate increases, nonrenewal of undesirable risks, the closure of new business in specific areas of Florida and the effective management of assignment of benefits issues.
Rival ratings agency disagrees with AM Best rating of Florida Family Insurance Company
Rival agency Demotech has shown its disagreement with the rating downgrades in a sharply-worded statement that emphasised the firm’s near-25-year heritage in the industry.
Demotech president Joe Petrelli said: “While other rating agencies might marvel at the underwriting process — rate increases, cancellations of policies in force, limiting new business, etc., Demotech understand the insurance process.
“We have watched Florida Family’s management team and its functional departments execute their duties at a high level for nearly 25 years.
“We see no reason for Demotech, producers, policyholders or any other third parties associated with Florida Family, to have concern about the company’s financial stability.”
While Demotech did recognise in its statement that extreme weather events hitting the state between 2016 and 2019 resulted in an operating loss for the insurer, it emphasised that Florida Family had been there through what it described as the “horrific” hurricane seasons of 2004 and 2005.
During these two seasons there were a reported 3,000 deaths and about $60 billion in damage.
Petrelli agreed with AM Best that the insurer had made positive steps to address its losses, but disagreed that its financial stability had slipped because of them.
“The management team has responded to the operating losses, is well-positioned to sustain its business model and they will continue to insure Floridians in the future,” he added.