Evolve Insurance Agency has learned that Demotech, Inc., a well-known financial rating company, has withdrew their rating of a large homeowners insurance company in Florida. Southern Fidelity Insurance Company had their financial rating withdrawn on Friday, June 3rd, 2022. Demotech's formal announcement can be found here. Demotech made the decision to withdraw Southern Fidelity's rating after the insurance company was unable to secure their 2022-2023 reinsurance program by June 1st. Annually June 1st is a key date in the Florida insurance business as that is the date when insurance companies must secure and disclose their purchase of a catastrophic reinsurance plan designed for the upcoming year. A reinsurance program is a type of insurance policy a regional insurance carrier purchases to help pay claims during a widespread disaster such as a hurricane or wildfire. If an insurance company is unable to secure a robust reinsurance program, it can lead to a dire financial situation for the company. Many of these insurance carriers - since they are smaller in size - would be unable to fully pay all outstanding claims in the event of a widespread disaster without a comprehensive reinsurance program in place.
Demotech, Inc. is a well-known company in the financial industry who is responsible for reviewing the accounting records, underwriting principles, and overall profitability of insurance companies to determine if they meet the standards needed to qualify for a ‘rating’ by their executive team. This rating, which is usually given as a letter followed by a adjective (i.e. “A, Exceptional”), is used to describe the company in a favorable or unfavorable way, and is viewed by many in the industry as a sign the insurance company is solvent and has a path towards continued growth and profitability. Some institutions, like mortgage brokers and lenders, use this rating to determine if the company meets the criteria to be a qualified insurer of a borrower’s home. When an insurance company is downgraded, or even worse has their rating withdrawn entirely, it can be a sign of a company in financial distress – and potentially a sign that their ability to remain solvent is questionable. In extreme circumstances, having a rating withdrawn can also mean that carriers insurance policy is no longer acceptable to mortgage brokers, lenders, and other underwriters when it comes to a borrower maintaining insurance coverage on their home.
This is never good news for a Florida resident to hear, especially right at the start of hurricane season which runs from June 1st through November 30th of each year. Given the current market conditions, this news comes as no surprise to Evolve Insurance Agency who’s ready to take action to keep you and your assets covered. If you are insured with either of these two insurance companies, or are experiencing other insurance related issues, the time to act is RIGHT NOW. In the previous 4 months, 7 large insurance companies have announced they are no longer offering policies to new customers in the State of Florida, and 2 insurance companies have been declared insolvent and effectively went "out of business". Don’t wait until it’s too late - request a quote today by visiting our quote request page in the upper right-hand corner of this page or give our office a call at 941-244-2760. We’ll go to work right away on getting your coverage secured with a reputable insurer.
David Kronk Jr.,
Owner, Evolve Insurance Agency