Three US senators opened an inquiry into insurance ratings firm Demotech and whether its assessments may be exposing Fannie Mae and Freddie Mac — and ultimately taxpayers — to growing risks tied to climate-driven insurer failures.
In a letter sent Tuesday to Fannie Mae Chief Executive Officer Priscilla Almodovar and Freddie Mac interim CEO Michael Hutchins, the three Democratic lawmakers questioned why the government-backed mortgage giants continue to accept Demotech ratings as sufficient proof of insurer financial strength, despite evidence that insurers carrying those ratings have failed at unusually high rates. In a separate letter, they pressed Demotech on its own finances and why, in 2022, it suddenly threatened to downgrade the ratings of up to 27 insurance companies.