Allstate Corp. and Alfa Mutual plan to drop wind coverage on an estimated 14,000 homeowner policies in Alabama’s two coastal counties over the next 18 months, the latest blow to property owners seeking insurance in an area vulnerable to hurricanes.
The cuts will affect as many as 7 percent of the homeowners in Mobile and Baldwin counties, state insurance officials said. Wind coverage has become increasingly difficult to obtain on Alabama’s coast since the area was battered by Hurricane Ivan in 2004.
Allstate spokesman Shane Robinson said the company, based in Northbrook, Ill., is withdrawing because Alabama regulators refused to allow the company to raise rates as high as it wanted to pay for reinsurance costs. Allstate, Alabama’s third largest property insurer, uses reinsurance to spread its risks to other companies.
State Insurance Commissioner Jim Ridling said the agency would allow Allstate to recover some of the reinsurance cost, but Allstate wanted to recover all of it.
Ridling said the cuts will affect 9,000 policies and bring Allstate’s total cuts in recent years to 30,000. Robinson said he couldn’t confirm that Allstate would make all the cuts that Ridling indicated.
Alfa, Alabama’s second biggest property insurer, is cutting wind coverage from 5,000 policies, state officials said.
Jeff Helms, spokesman for the Montgomery-based company, said Alfa had too much money at risk if a hurricane hit the Alabama coast.
“This is something we needed to do to make sure Alfa could continue to serve its policyholders and pay claims statewide,” he told the Mobile Press-Register.
The changes will take effect when customers’ policies come up for renewal. Policyholders who are losing coverage must be notified 120 days before their renewal dates.
State Farm, based in Bloomington, Ill., is the state’s largest property insurer and the only traditional state-regulated insurance company that has been accepting new business in Alabama’s coastal counties, but it limits how many new customers it will take.
Homeowners seeking wind coverage can look to surplus lines insurers, or turn to the Alabama Insurance Underwriting Association, which is known as the “beach pool” and is considered the insurer of last resort. Both options are typically more expensive than traditional insurance policies.
With traditional insurance becoming harder to get, the beach pool has more than doubled in size in the last 18 months and now has 14,406 policies.