Florida’s Workplace of Insurance coverage Regulation (OIR) will get an A+ for creativity in its effort to keep away from an ideal storm insurance coverage disaster, which I famous in Surprising! Surprising To Imagine That Any Insurance coverage Regulator Would Rely Upon Demotech, and Insurance coverage Agent Chief Questions Motives of Demotech to Downgrade Florida Insurers. In a profitable final second three-point shot, the OIR, with settlement from Residents Property Insurance coverage, is having Residents reinsure the 17 carriers about to be downgraded by Demotech. This artistic answer satisfies federal mortgage necessities.
The announcement from the OIR acknowledged:
[T]he Florida Workplace of Insurance coverage Regulation (OIR) introduced a plan to ascertain a brief reinsurance association by way of Residents Property Insurance coverage Company (Residents) within the occasion of disruptive monetary ranking downgrades from Demotech, Inc. This unprecedented answer would permit insurers to fulfill an exception supplied by the Federal Nationwide Mortgage Affiliation (Fannie Mae) and the Federal House Mortgage Mortgage Company (Freddie Mac) and ensures Floridians can keep protection throughout hurricane season.
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Fannie Mae and Freddie Mac require that property insurance coverage insurance policies for properties with a mortgage backed by Fannie Mae or Freddie Mac should be written by an insurer assembly monetary ranking necessities.
Fannie Mae and Freddie Mac every provide an exception to the monetary ranking necessities for an insurer that’s lined by a reinsurer who assumes, by endorsement, one hundred pc of the insurer’s legal responsibility for any lined loss payable, however unpaid by the insurer, by cause of insolvency. Within the occasion {that a} collaborating insurer is said bancrupt, the Florida Insurance coverage Warranty Affiliation shall perform its statutory duties underneath Half II of Chapter 631, Florida Statutes, and pay claims as set forth within the statute.
In consequence, OIR, along side Residents, has fashioned a program that meets the exceptions to the Fannie Mae or Freddie Mac tips. Subsequently, there needs to be no cause for lenders to require a substitute coverage, or pressure place protection primarily based solely on the rankings downgrades. This momentary association would permit insurers to stay viable, to proceed offering protection for Floridians and helps maintain insurance policies out of Residents.
Readers of this weblog know that I’m Truthful and Balanced. On this occasion, the OIR deserves reward. I’m not the one one saying so.
Paul Handerhan is a very skilled and understanding observer of Florida’s insurance coverage market. He was quoted in an Insurance coverage Journal article, Florida Regulators Unveil Rankings Disaster Answer: Let Residents Reinsure Carriers, stating:
[T]he plan is an effective one, mentioned Paul Handerhan, president of the Florida-based Federal Affiliation for Insurance coverage Reform. He famous that it’s much like a ‘cut-through endorsement’ that primarily ensures an insurer’s obligations.
Rankings downgrades doubtless wouldn’t have price Fannie Mae considerably, however the brand new association ought to give the lenders confidence that loans are totally protected, Handerhan mentioned.
Florida Insurance coverage Commissioner David Altmaier and his employees deserve a tip of the hat and a shout-out for locating a manner out of this present disaster. However that is only a momentary measure. There may be far more work that must be carried out to realize a secure insurance coverage market in Florida.
No hurricanes in 2022 would assist quite a bit. However it’s harmful to make an insurance coverage enterprise mannequin constructed on luck.
Thought For The Day
I’ve missed greater than 9000 pictures in my profession. I’ve misplaced nearly 300 video games. 26 occasions, I’ve been trusted to take the sport profitable shot and missed. I’ve failed over and time and again in my life. And that’s the reason I succeed.
—Michael Jordan
