Guides
Demotech ratings and Florida's insurers
Why most Florida home insurers carry Demotech ratings, what an A (Exceptional) means, how lenders treat it, the 2022 downgrades and the criticism.
Demotech, Inc., a financial analysis firm in Columbus, Ohio, rates most Florida-based home insurers, and its "A (Exceptional)" rating is the one that lets those companies write policies for homeowners with mortgages, because Fannie Mae and Freddie Mac accept it. The rating is a different measure from AM Best's, it went through a crisis in 2022 and drew a letter from three U.S. senators in December 2025, and its record in Florida is disputed. You need to know what the letter means, who stands behind the company if it fails, and what to do before a rating changes.
Who Demotech is and how the scale works
According to Demotech's own description, the firm was established in 1985 and rates property and casualty, life and health, and title insurers. It has been registered with the SEC as a nationally recognized statistical rating organization since July 11, 2022. Demotech says it was the first rating firm whose process was formally reviewed and accepted by Fannie Mae, Freddie Mac and HUD. The Insurance Journal reported in 2022 that Demotech began rating Florida insurers in the 1990s, after Hurricane Andrew in 1992, and has become the dominant rating system for most of them.
Demotech's scale, from its definitions page, ties each grade to a survival expectation rather than to an AM Best-style ability-to-pay letter:
| Grade | Demotech's label | Share of insurers at this grade expected to keep positive surplus 18 months later |
|---|---|---|
| A″ (A double prime) | Unsurpassed | 100% |
| A′ (A prime) | Unsurpassed | At least 99% |
| A | Exceptional | At least 97% |
| S | Substantial | At least 95% |
| M | Moderate | At least 90% |
| L | Licensed | Financial stability precludes a higher grade |
So an A means Demotech expects at least 97 in 100 insurers at that level to still have positive policyholder surplus a year and a half later. It is a statement about staying solvent through ordinary cycles. It is not a statement that the company will pay promptly after a major hurricane, and it is not comparable with an AM Best A. Our Financial strength ratings: AM Best, S&P, Moody's and Demotech guide lays the agencies side by side.
Why Florida insurers use it
Florida's home insurance market leans heavily on domestic carriers that write almost entirely in one hurricane-exposed state. Many hold a Demotech A (Exceptional) rating, including Universal Property & Casualty, Florida Peninsula, Slide, Tower Hill, Heritage and Homeowners Choice, according to their profiles on this site. A few rely on another agency: Frontline Insurance carries a Kroll Bond Rating Agency BBB+ (stable). For the wider market see florida's domestic home insurers: who they are and florida's home insurance market: what happened and what changed.
The lender angle explains the dominance. Fannie Mae's Selling Guide (section B7-3-01, 12/14/2022 revision, read in October 2026) requires an insurer rated by one of these: AM Best B or better, Demotech A or better, KBRA BBB or better or S&P BBB or better. Only one is needed. An S (Substantial) is not enough. A Florida insurer whose only rating is Demotech's therefore needs its A: if it falls to S, it no longer meets the test for homeowners whose mortgages are sold to the agencies, unless an exception applies.
What happened in 2022
In July 2022, Demotech reportedly notified 17 Florida insurers that they would be downgraded from A to S or M, according to the Insurance Journal. Florida's chief financial officer wrote to the Federal Housing Finance Agency and the agencies warning of "financial chaos," and the insurance commissioner challenged Demotech's methodology. The Florida Office of Insurance Regulation approved a plan letting Citizens act as a backstop, paying some claims for insolvent insurers, and Fannie Mae and Freddie Mac accepted that cut-through endorsement plan in December 2022.
On August 2, 2022, Artemis reported that Demotech had affirmed A ratings for two dozen Florida carriers, downgraded United Property & Casualty (UPC) two notches to M, and withdrawn the ratings of FedNat and Weston. FedNat had earlier lost its A and been cut to S.
The Florida Department of Financial Services lists the liquidations that followed. Southern Fidelity was ordered liquidated on June 15, 2022, Weston on August 8, 2022, FedNat on September 27, 2022 and UPC on February 27, 2023. In most cases policyholders had about 30 days to find new coverage. In some cases policies transferred: St. Johns' roughly 147,000 policies moved to Slide in March 2022, and Monarch National had assumed about 78,000 FedNat Florida policies before FedNat's liquidation. As of October 2026, UPC is the most recent Florida property insurer on the Department's receivership list.
The criticism, and Demotech's answer
Critics make three connected arguments.
- Track record. A letter dated December 23, 2025 from U.S. Senators Whitehouse, Wyden and Warren to Fannie Mae and Freddie Mac cites a study finding that nearly 20% of Demotech-rated Florida insurers became insolvent between 2009 and 2022 while carrying an A rating, and asks whether the agencies will raise the Demotech minimum or require dual ratings. The senators' claim rests on third-party research, so it is their characterization.
- Modeled comparison. A 2024 working paper by researchers at Columbia, Harvard and the Federal Reserve Board estimated that close to 67% of Demotech-rated insurers would not meet Freddie Mac's eligibility requirement, and 21% Fannie Mae's, if judged on an AM Best-style rating. The paper has not been peer reviewed, according to the Insurance Journal.
- Methodology. Florida regulators and some reinsurers have questioned whether Demotech applies its own criteria consistently.
Demotech disputes this. Its president has called the 2024 study incomplete and out of date and has defended Demotech's track record. A fair summary is that the evidence is contested rather than settled, the GSEs continue to accept Demotech A, and the fact that lenders accept a rating does not make it equal to a stricter agency's.
What it means for a Florida homeowner
- Check the insurer and the rating date. Find the legal insurer on your declarations page, then look it up in Demotech's rating notifications and note the date.
- Know your lender's minimum. If your mortgage is sold to Fannie Mae or Freddie Mac, an S rating can be a problem. Ask your servicer how it handles a downgrade. See Fannie Mae and Freddie Mac homeowners insurance requirements.
- Understand the backstop. If a Florida insurer is liquidated, the Florida Insurance Guaranty Association (FIGA) pays covered claims. FIGA's posts describe a general cap of $300,000 per claim, with an additional $200,000 for structures and contents on homeowners claims. It funds itself through assessments on policyholders: 1.3% in March 2022 for St. Johns, 0.70% in August 2022 for Southern Fidelity and Weston, and a 1% emergency assessment in April 2023 for UPC. See property and casualty guaranty funds explained.
- Look beyond the letter. Ask the agent how the insurer's reinsurance renewed, how long it has written in your county, and whether it took part in Citizens takeouts (takeout policy). If you cannot find private coverage at all, see Citizens Property Insurance in Florida: who qualifies and what to know.
- Have a plan if it fails. Policies of a liquidated insurer are typically canceled within about 30 days of the order, as the 2022 and 2023 cases show. Start shopping as soon as you get notice. See what happens if your home insurer goes insolvent.
Where the market stands
Florida's insurance regulator reported on May 20, 2026 that 20 new property insurers had entered the market since the 2022 and 2023 reforms, and that domestic insurers' pooled combined ratio was 83% for 2025, against 109% in 2022. Those are improving numbers, and many Florida insurers have since filed rate decreases. They do not change the underlying design: Florida insurers are concentrated in one hurricane-exposed state, rely on reinsurance bought each June, and often carry a rating from an agency that most national insurers do not use. See Florida and florida's 2022–2023 property insurance reforms explained for the full picture.
Key takeaways
- Demotech rates most Florida home insurers. Its A (Exceptional) means at least 97% of insurers at that level are expected to keep positive surplus 18 months later.
- Fannie Mae and Freddie Mac accept Demotech A or better, but an S (Substantial) does not qualify, which is why the 2022 downgrade threat alarmed regulators.
- UPC, FedNat and Weston were downgraded or had ratings withdrawn by Demotech in 2022 and were liquidated by February 2023. Critics, including three U.S. senators in December 2025, question Demotech's record; Demotech disputes the criticism.
- Check your insurer's legal name, its Demotech grade and date, and your lender's minimum, and know how FIGA works before you need it.
- A rating is a signal, not a guarantee; pair it with the insurer's age, reinsurance and complaint record.