Liz Bury | 22 February 2022
Ratings agency Demotech has signalled that six more regional US carriers could be in the crosshairs to have their rating withdrawn if figures filed for full-year 2021 fall short of expectations.
The agency has withdrawn financial stability “A Exceptional” ratings from Florida carriers St Johns and Avatar in the past week.
Joseph Petrelli, president at Demotech, said: “There may be six more, in addition to the two already out there.”
Petrelli stressed that the ratings decisions would depend on operating results for the full-year 2021 that are due to be filed to the agency on 28 February.
“We requested information from all the companies we work with. They filed preliminary statements on 21 February and will file final figures on 28 February.“
It is critically important that the final results meet or exceed what they told us would happen. They have given us estimates that they believe to be accurate. If they hit their marks they will be fine, and if they don’t, they have a problem,” Petrelli said.
Demotech confirmed it was working with Slide Insurance’s founder and CEO Bruce Lucas with a view to assigning a rating to the start-up insurer which would include the St Johns book of business it is looking to take on.
Petrelli, who has been analysing independent and regional carriers for more than 30 years, described Florida as a distressed residential property insurance marketplace.“
It is under attack by plaintiff’s attorneys, and the reinsurance costs are high to reflect the fact it’s a distressed market,” he said.
The news of St John’s rating being withdrawn was reported by this publication Friday, the same day that Demotech withdrew its rating on Avatar.
Avatar declined to comment when contacted by this publication. According to SNL data, reinsurance providers that assumed premium from the firm in recent years include Goose Creek Capital (a Kellogg family firm that also owns IAT Re), Sompo, Berkshire, Lloyd’s carriers, Chubb, Everest Re and SiriusPoint.
Avatar also sponsored the Casablanca cat bonds.
Alongside the news about these two firms, other private insurers in Florida have signalled they will take steps to limit new exposure and shed policies – with state-backed carrier Citizens set to expand significantly, which will lead to some consolidation of reinsurance spending and reshuffling of portfolios in the state.