A home insurer based in South Florida is facing a ratings downgrade just as the hurricane season is about to begin.
The insurer, Sawgrass Mutual Insurance Co. of Sunrise, is now listed as “licensed,” The Palm Beach Post reported. This means that while the insurer – currently with 20,000 customers – is licensed by state officials, it does not qualify for higher ratings from Demotech, the ratings firm that issued the downgrade.
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A statement from Demotech said that the decision to downgrade Sawgrass was necessary despite a number of “potential transactions” under negotiation that involve the firm.
“The company filed its initial year-end 2016 financial statement, reporting surplus in excess of $20 million, in a timely manner,” Demotech president Joseph L. Petrelli said in a statement.
“The company secured an effective reinsurance program prior to storm season. The focus of the company was to identify suitors and negotiate a transaction that was favorable to their policyholders rather than write additional new business.”
The ratings firm also said that the deadline for Sawgrass to employ an independent audit passed without Demotech receiving a copy.
“The second quarter 2017 financial statement, presented to us on August 16, 2017, and a revised year-end 2016 financial statement, present surplus and other financial metrics at levels that no longer support its previous rating,” Demotech said. “Concurrently, management has not communicated the most recent status of negotiations by the company.”
Florida has some of the highest insurance premiums in the country – the result of the region’s numerous and costly home insurance claims. Insurers believe that contractors and claims lawyers are at fault for this by abusing the “assignment of benefits” practice to create claims. Conditions in Florida have worsened to the point that many national insurers have pulled out of the region, leaving smaller and untested companies to fill in the void.
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