Thursday, June 07, 2007

Coastal Homeowners Insurance - Has it stopped getting worse?

Apologies for not writing in a while. I'm not unhappy to say that it's because our office has been very busy. We're having other adventures as well, having just installed a new 'paperless office' software and hardware system. There is still paper on everybody's desk, but the piles are slowly going down and will not return.

In any event, there is news, and some rumors, to report. In the very short term, like right now, insurance companies are still tightening up and cancelling or non-renewing homeowners insurance for many people on Long Island and other coastal areas. In the past two weeks, two fairly large players shut off new business in Suffolk County and most of Nassau. This is a matter of how much capacity they have overall, not a fear of any one house getting damaged. Another major carrier, one of the biggest in the country, in fact, stopped writing within a half mile of the shore and rumor has it they may start canceling those within 1000 feet of tidal water.

Insurance companies can buy reinsurance to protect themselves from major catastrophes. But how much they can buy is limited to some extent by their overall size and capital reserves (that's grossly oversimplified but the longer explanation is so boring that it hurts). And the insurance regulators as well as the financial companies that give insurance carriers their precious A and A+ ratings are threatening to lower them if they don't reduce their waterfront and coastal insurance exposure.

Add in to those issues that there are a number of large carriers that have come in to the market just writing car insurance, taking no part of the risk in the homeowners insurance department, and most especially not the coastal properties. That has also reduced the capital and reserves of the remaining companies that write both auto and home insurance. That's why one of the big criteria that a certain company is using to decide who to cancel is whether they have their car insurance with them or somewhere else. They are giving preference to customers who also insure their cars along with the home, and why not? Most businesses are expected to give some discount or other incentive to those who buy more from them.

But there may be some light at the end of the tunnel. For the first time in a long time I heard at a meeting the other day some news of early discussions with insurance carriers who are not in the Long Island homeowners insurance market at all. That's what we need, some companies who can balance their exposure in other parts of the country against some new business in Nassau and Suffolk Counties. This will still take probably the rest of this year to show any real progress, but at least it's a rumor in the right direction.