Anybody outraged simply hasn’t been paying close enough attention. Friedlander is right on the money.
The warnings have been flashing for years. Industry warnings brushed aside. This is the consequence of the Powers that be’s Ostrich approach to the Industry’s woes. Quit the whining and go to work!
I don’t know what they think they are going to achieve by getting a new rating agency other than delaying the reckoning until the reviews are done. AM Best certainly isn’t going to threaten its reputation by giving into ratings pressure.
Companies have been supporting their underwriting losses with outside capital for years. Now that interest rates are up and investors are getting risk averse, that money could be turned off in an instant.
With the stock market returns in the toilet there’s going to be fresh capital even for a risky market like Florida. That capital isn’t going to be cheap though and with Citizens running at a loss with insufficient rates it’s going to create a problem.
The issue also is that these companies have years of legacy liabilities and exposure that an investor is going to have to bail out before they can start making a return on their investment. I think it’s more likely that you’ll have new entrants like Slide who are starting fresh rather than keeping current companies on life support. Why invest in a sinking company when you can capitalize a new company and pick up the pieces for cheap when the incumbents start collapsing?
a short term solution. Pretty much all these companies were formed in the past 15 or so years, and some more recently, to avoid the legacy liability issue and start anew. And yet here we are. It’s not the companies, its the market. The market can’t succeed with the issues with which the Florida insurers are asked to contend. If they could, you’d see State Farm and other large stock and mutual insurers pouring back into the state to grab a slice of the profit pie. Slide may be hot today, and insolvent in five. No matter how much capital investors are willing to contribute, at whatever cost, eventually there has to be consistent profit. Even the insurtech industry is slowly learning this lesson.
Depends on how the new companies approach rates. If they can name their price, then they have an opportunity to make it work. If you come in with rates 50% higher than where the private market is today, you could probably make money. With Citizens being trapped with low rates though, that won’t happen.
July 26, 2022 at 11:46 am
Tim says:
Well-loved. Like or Dislike:
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I can solve this quickly. First, Have the Florida regulator release the names of the 27 carriers referred to it’s new solvency monitoring department, and compare that list with the Demotech 17. If Florida felt compelled to have the companies referred for special monitoring, then perhaps Demotech is right in changing their ratings. And maybe there are another 10 that should be more closely evaluated.
Second, have AM Best and Standard & Poor provide their ratings for the Florida domestic market, and we can compare those ratings with Demotech’s proposed ratings, and see how they compare. But wait, we can’t do that because AM Best and S&P abandoned rating these companies, so there is nothing to compare. Maybe the regulators and agents should stop to think about that. This “rogue” rating company is all that’s left for rating these agencies. Or is DeSantis going to create a new Florida only rating agency and legislate what can and what can’t be said regarding the solvency of Florida domiciled companies, on pain of losing your privilege to visit Disney World and the state’s beaches. Instant market credibility because DeSantis says so…
And just like that, the house of sinking cards that is the Florida homeowners property market lives on for another day. Until lawmakers get really serious about fixing the underlying problems and get rid of the parasite lawyers, we’ll be back here very soon.
I noticed they didn’t offer Weiss Rating Service as an alternate. Could that be because Weiss
rates most of the carriers as “C” to “E”. Only one “A “, that being Citizens.
How about posting just the FACTS? Let’s all take a good look at those looming Loss Ratio’s. WE ALL would like to see who’s healthy and who’s not. Capital will decide who/what gets their vote. No one here is surprised. Exhausted from remarkets, but not surprised. Nuff said.
Anybody outraged simply hasn’t been paying close enough attention. Friedlander is right on the money.
The warnings have been flashing for years. Industry warnings brushed aside. This is the consequence of the Powers that be’s Ostrich approach to the Industry’s woes. Quit the whining and go to work!
I don’t know what they think they are going to achieve by getting a new rating agency other than delaying the reckoning until the reviews are done. AM Best certainly isn’t going to threaten its reputation by giving into ratings pressure.
Companies have been supporting their underwriting losses with outside capital for years. Now that interest rates are up and investors are getting risk averse, that money could be turned off in an instant.
With the stock market returns in the toilet there’s going to be fresh capital even for a risky market like Florida. That capital isn’t going to be cheap though and with Citizens running at a loss with insufficient rates it’s going to create a problem.
The issue also is that these companies have years of legacy liabilities and exposure that an investor is going to have to bail out before they can start making a return on their investment. I think it’s more likely that you’ll have new entrants like Slide who are starting fresh rather than keeping current companies on life support. Why invest in a sinking company when you can capitalize a new company and pick up the pieces for cheap when the incumbents start collapsing?
a short term solution. Pretty much all these companies were formed in the past 15 or so years, and some more recently, to avoid the legacy liability issue and start anew. And yet here we are. It’s not the companies, its the market. The market can’t succeed with the issues with which the Florida insurers are asked to contend. If they could, you’d see State Farm and other large stock and mutual insurers pouring back into the state to grab a slice of the profit pie. Slide may be hot today, and insolvent in five. No matter how much capital investors are willing to contribute, at whatever cost, eventually there has to be consistent profit. Even the insurtech industry is slowly learning this lesson.
Depends on how the new companies approach rates. If they can name their price, then they have an opportunity to make it work. If you come in with rates 50% higher than where the private market is today, you could probably make money. With Citizens being trapped with low rates though, that won’t happen.
I can solve this quickly. First, Have the Florida regulator release the names of the 27 carriers referred to it’s new solvency monitoring department, and compare that list with the Demotech 17. If Florida felt compelled to have the companies referred for special monitoring, then perhaps Demotech is right in changing their ratings. And maybe there are another 10 that should be more closely evaluated.
Second, have AM Best and Standard & Poor provide their ratings for the Florida domestic market, and we can compare those ratings with Demotech’s proposed ratings, and see how they compare. But wait, we can’t do that because AM Best and S&P abandoned rating these companies, so there is nothing to compare. Maybe the regulators and agents should stop to think about that. This “rogue” rating company is all that’s left for rating these agencies. Or is DeSantis going to create a new Florida only rating agency and legislate what can and what can’t be said regarding the solvency of Florida domiciled companies, on pain of losing your privilege to visit Disney World and the state’s beaches. Instant market credibility because DeSantis says so…
And just like that, the house of sinking cards that is the Florida homeowners property market lives on for another day. Until lawmakers get really serious about fixing the underlying problems and get rid of the parasite lawyers, we’ll be back here very soon.
I noticed they didn’t offer Weiss Rating Service as an alternate. Could that be because Weiss
rates most of the carriers as “C” to “E”. Only one “A “, that being Citizens.
Weiss Ratings
How about posting just the FACTS? Let’s all take a good look at those looming Loss Ratio’s. WE ALL would like to see who’s healthy and who’s not. Capital will decide who/what gets their vote. No one here is surprised. Exhausted from remarkets, but not surprised. Nuff said.