With the heart of hurricane season looming, a South Florida home insurer that recently had more than 20,000 customers faces a ratings downgrade from Demotech Inc.
Formerly A-rated, Sawgrass Mutual Insurance Co. of Sunrise is now listed as “licensed,” meaning only that it is licensed by state officials but does not qualify for higher ratings from Demotech.
It’s another troubling sign in a state with the nation’s highest insurance premiums, where many national insurers have pulled back and smaller, untested companies have stepped in.
On the eve of hurricane season in May, Mount Beacon Insurance Co. went out of business and about 22,000 of its policies were transferred to Florida Specialty Insurance Co.
The action with Sawgrass was necessary despite a number of “potential transactions” under negotiation that involve the firm, a Demotech statement said.
Demotech president Joseph L. Petrelli said in a statement, “The Company filed its initial year-end 2016 financial statement, reporting surplus in excess of $20 million, in a timely manner. 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.”
Attempts to reach insurance company officials for comment late Monday were not successful.
The deadline for an independent audit passed without Demotech receiving a copy, the ratings firm said.
“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.”