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Ratings agencies play an important role in insurance policy placement and regulation. The best known insurance rating agencies are AMBest, Moody, Fitch and Standard & Poors. However, the ratings agency that is drawing the most attention these days in the property insurance market, especially in the state of Florida, is Demotech.

Demotech, based in Ohio, was formed in 1989 to provide financial stability ratings to the property & casualty insurance industry. After Hurricane Andrew in 1992 upended the property insurance market, insurers realized that worst case loss scenarios needed to be accounted for in their rates, reinsurance, capital and surplus. Financial stability ratings like those provided by Demotech became more vital tools for regulators, producers and policyholders to assess the financial condition of an insurer. In addition they fill a need to rate insurers that are unrated by the larger ratings firms either because they have declined to be rated by the larger ratings services (some of the larger agencies operate on a pay to rate basis), because of their smaller size or limited territory of operations; this is the case with many of the Florida property insurers.

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