The insurance company rating service, A.M. Best Company, says insurers with large exposures in hurricane-prone areas of Florida could have their ratings downgraded because of concerns over the financial strength of the Florida Hurricane Catastrophe Fund.  Even the threat of a downgrade, which makes it more expensive for a company to borrow, could prompt insurers to get rid of policies in order to reduce their exposure. 

Insurers in Florida are being ordered to lower their rates by June because of the availability of cheaper reinsurance from the cat fund, but the fund only has a little more than $1 billion in the bank and would have to float a bond issue to pay major hurricane losses.  It then would assess every homeowner, auto, marine and commercial insurance policy in the state to repay the bonds, potentially causing major rate increases.

March 6, 2007