Florida eyes reinsurance role for state backstop insurer Citizens

Florida may backstop endangered property insurers with a plan to offer reinsurance via the state's own insurer of last resort, Citizens, and protect Citizens from the threat of a mass pick up of Florida homeowner clients, the state's top insurance regulatory office OIR announced.

The unheralded announcement came as the industry faces down the threat of what could be across-the-board ratings downgrades from the Demotech agency. Demotech has signalled its review and the possibility of widespread downgrades, but had issued a stay of execution to an unspecified future date.

For some primary carriers, rating downgrades could put their policyholders in conflict with  mortgage requirements from the US government-sponsored mortgage securitisation enterprises Fannie Mae and Freddie Mac. In this scenario, homeowners would be forced, en masse, into Citizen's primary coverage. The US agencies allow exceptions for primary carriers with full reinsurance cover.

“OIR’s greatest priority is ensuring consumers have access to insurance, especially during hurricane season; and because of the uncertainty with the status of Demotech's ratings, we’ve been forced to take extraordinary steps to protect millions of consumers,” Insurance Commissioner David Altmaier said.

“This innovative arrangement satisfies requirements set by the secondary mortgage market. In the event we need to implement this temporary solution, consumers will not need to seek coverage elsewhere, agents will not need to move policies, and lenders can have confidence that these insurers continue to meet the mortgage qualifications.”

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