Allstate dropping most earthquake coverage nationwide

June 19, 2006

Allstate Insurance Co. says it is dropping earthquake insurance to most of its 407,000 quake customers nationwide as a part of a larger move to reduce exposure to catastrophic losses.

Allstate Spokesman Mike Siemienas in Chicago said four states require the company to offer earthquake coverage, but the company is in various stages of talks with regulators there.

He said the states are Kentucky, Connecticut, Rhode Island and Florida. Additionally, the company will continue to renew earthquake coverage in New Hampshire, New York and Pennsylvania.

Allstate regional spokeswoman Caitlin Gorand, in Bothell, Wash., said the company has not written new earthquake insurance since March 6 and that existing earthquake policies will not be renewed.

Northbrook, Ill.-based Allstate Corp. is the nation’s second-largest personal lines insurer. Siemienas said the company has declined storm renewals in some parts of Florida and New York and has taken a hard look at coastal coverage from Texas to Florida beginning with Hurricane Andrew in 1992.

He said some policies in those areas for wind and hail coverage are being put into state wind pools.

He said the company recently purchased $2 billion in reinsurance to help cover future losses from named storms, earthquakes and fires-after-earthquakes.

Allstate lost $1.55 billion in the third quarter last year largely because of Hurricane Katrina, its largest quarterly loss since it was publicly traded.

Aside from quake-prone California, the Insurance Information Institute also lists Seattle, Portland, Ore., New York City and Salt Lake City as among cities with high loss potential.

Gorand said Allstate has found other companies willing to take over coverage in some states and is seeking those willing to take it over in others. Allstate agents will begin offering earthquake coverage through a California firm, Geovera, which specializes in the earthquake field, spokeswoman Caitlin Gorand said.

California coverage is not affected by the Allstate decision, Gorand said. It is covered by the California Earthquake Authority, which has about 750,000 policies in force covering about 13.5 percent of the state’s homeowners. The authority, founded by the Legislature in 1996, has approved a 22 percent rate cut effective July 1 to encourage more people to buy coverage.

Earthquakes, which cannot be predicted with any degree of precision, are most frequent in the West, and while a few deadly ones have been recorded in the Eastern and central parts of the country, there have been no major ones there since the 1800s.

It is a matter of time before another major quake hits the seismically active West, home to considerable volcanic activity and geologic fault lines. The country’s most severe quake in modern times had a magnitude of 9.2 in Alaska in 1964. One believed to be almost as large hit the Pacific Northwest coast in 1700, permanently changing the coastline.

Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Topics California Florida Catastrophe Natural Disasters New York

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