A Florida legislative panel last week voted unanimously to find an alternative to the ratings agency Demotech – which originally planned to downgrade the ratings of some 17 insurers in the state.
On Friday, the panel voted to spend $1.5 million on consultants to look for alternatives to Demotech. In July, Demotech raised the ire of politicians when it announced its plan to downgrade 17 insurance companies. The downgrade was ultimately postponed, but several insurers were still issued downgrades or had their ratings withdrawn.
Read more: Three property insurers see their ratings downgraded, withdrawn
“Our hope is that we’re going to go forward with a process that is going to protect the insured properties in this state and benefit the insurance companies so we have more competition,” deputy chief financial officer Julie Jones told the Joint Legislative Budget Committee (LBC).
The $1.5 million is a cap on consultation contracts, and the consultants will offer recommendations to Florida Governor Ron DeSantis and the Legislature, Florida Politics said.
Florida chief financial officer Jimmy Patronis and state insurance commissioner David Altmaier had previously each written a letter to Demotech president Joseph Petrelli, as well as federal housing officials, to petition to call off the downgrades.
Read more: Ratings downgrade of 17 insurers granted stay of execution – for now
Demotech shortly after the letter postponed the downgrade, but Petrelli cautioned that the firm may still publish the remaining ratings updates.
Florida Politics reported that Petrelli believes Demotech is a fair evaluator of the state’s market, and that the LBC’s decision to find another ratings agency is “unnecessary.”
“Today’s action is an unnecessary response to a problem that does not exist,” the president said in a statement. “The reality is that when Hurricane Andrew devastated the state nearly 30 years ago, the rating agencies involved in Florida chose to step away — but Demotech stepped up.”