Southern Fidelity Insurance loses financial rating

In another troubling sign for Florida’s property insurance market, Southern Fidelity Insurance Co. has lost its financial stability rating.

The rating agency Demotech announced it withdrew the rating, at least in part because Southern Fidelity was not able to finish purchasing reinsurance, which is critical backup coverage.

Demotech said Southern Fidelity had earlier informed agents that it was suspending writing new and renewal policies while it tried to buy reinsurance for the hurricane season.

“After completing our review of first quarter 2022 financial statements and considering that the company’s reinsurance coverage for the 2022 hurricane season is not complete as of June 2, 2022, Demotech has withdrawn the financial stability rating previously assigned to Southern Fidelity Insurance Company,” Demotech said on its website Monday.

A similar move by Demotech in March was followed by Lighthouse Property Insurance Corp. being placed into receivership and declared insolvent.

State lawmakers held a special legislative session last month to try to bolster property insurers, which have shed policies and raised premiums amid financial losses. As part of the effort, lawmakers decided to spend $2 billion to provide additional reinsurance coverage for companies.

The six-month hurricane season started Wednesday.