The ratings agency plans to downgrade 27 Florida-based property insurance companies

TALLAHASSEE – CBS4 has learned that a rating agency plans to downgrade 27 of 40 Florida-based property insurance companies.

It’s a move that could leave millions of homeowners nationwide paying more, even leaving some scrambling to find a new insurer.

“They very dramatically affect the market down here, the real estate market, the housing market, everything,” said Alex Ray, Director of Marketing and Sales for John Galt Insurance.

“It’s kind of a nightmare, honestly,” added Parkland resident Gordon Light.

He has lived in Parkland for nearly three decades. More recently, two different insurance companies dropped it last year, including state-run Citizens.

“All of a sudden, I get a notice of termination, cancellation, and I go, are you serious,” Light added.

Multiple insurers have canceled his property insurance and he has also been paying thousands more a year in insurance premiums.

“I don’t know what needs to be done, but something needs to be done,” Drita said.

John Galt Insurance contacted Light to set up a new policy.

And depending on the outcome, Ray expects the need to grow by millions in Florida.

But that’s not the worst part.

“The harsh reality is that people are going to have to sell their homes because they can’t afford the insurance,” Ray said.

It’s a bleak outlook based on forecasts that the firm Demotech will downgrade the financial stability scores for 27 insurers to an “S” for substantial or “M” for moderate.

The Big Picture: If your mortgage servicer is federally backed by Fannie Mae or Freddie Mac, they won’t accept anything less than an “A” rating.

Ray adds that people would then be at risk of defaulting on their home loans.

“Forced to find alternative insurance in this market or get force insurance from their lender,” Ray said.

Ray says mortgage company-forced insurance tends to be more expensive and offer less coverage.

And with less qualified insurers, “trying to add all these policies that need to be rewritten is not a viable solution,” Ray continued.

State Rep. Danny Perez says he understands the financial burden homeowners face.

“Anything that could potentially raise rates for the homeowners insurance market is a concern to us,” Perez stressed. “It must be.”

He mentions that for this reason legislation was approved in a special session in May to address this problem.

“It’s disheartening to see the market trend in the wrong direction,” Perez said.

The addition of lawmakers realized it would take 18 to 24 months for Floridians to see positive changes. Reinsurance fund monitoring for carriers to reduce costs for homeowners.

“Those carriers that use this relief fund will have to lower premiums using those specific carriers on a mandatory basis,” Perez added.

It remains to be seen how many carriers will remain solvent. Ray estimates several more will go belly up in 2022. He says insurance companies in Florida reported more than $1.5 billion in losses last year alone.

Ray also told CBS4 that Florida is appealing for federal loan guarantors to recognize the “S” rating from Demotech.

He adds that this would help the insurance market and the average Florida homeowner.

Demotech was set to release the estimates on Tuesday, but CEO Joe Petrelli said pressure from state officials has delayed it until further notice.

In a one-page letter, Petrelli wrote: “While we are unable to provide a specific release date, we are working to expedite the release of our estimates as soon as possible.”

A source told CBS4’s Joe Gorchow that a more complete response to Insurance Commissioner David Altmaier is still forthcoming Tuesday.

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