A newly-formed Mississippi company with backing from a Florida insurer and local private investors including six independent agencies will begin writing homeowners policies on the coast in Mississippi.
Gulfport-based Coastal American Insurance Co. says it will specialize in homeowners insurance that will give coastal Mississippians a break from high premiums they are now paying for coverage from private insurers and the state’s wind pool.
The company will write up to 1,000 homeowners policies with wind coverage in the state’s six coastal counties “all the way down to the water’s edge” between now and the time the hurricane season ends, according to Ned Dolese, marketing manager for Coastal American and a key investor.
Capping the number of policies in the first five months will assure that the new insurer can handle claims should a major storm hit, he said. “We want to be able to survive a storm and price reinsurance we can afford,” he told Insurance Journal.
The insurer will target homes valued between $150,000 and $250,000. The average house with coverage from the wind pool is valued at about $188,000.
Coastal American will require its coastal customers to also purchase flood insurance through the federal program that its agents are authorized to sell. However, even with this requirement—which Dolese said Mississippi regulators reviewed and approved—homeowners should still pay less than they do now and also be covered for flooding.
He said the insurer will coordinate any claims between wind and flood coverages so the customer is not caught in the middle when there is a question about whether damage was caused by wind or water. Coastal American will not surcharge or make any money off the flood policies, Dolese said.
He said wind pool customers that are in special flood zones are already required to also buy flood coverage.
Coastal American says it will inspect all properties and offer mitigation discounts.
Around Nov. 1, after the wind and hurricane season is over, the company will begin competing with other carriers offering standard homeowners policies without wind coverage to coastal residents, as well as selling policies in the rest of the state.
Coastal American received its license effective Jan. 1, 2010. The company is starting with $5 million in capital—all equity, no debt. Sunshine State Insurance, based in Florida, owns 27 percent, while six local agencies own about 20 percent. The remaining private investors include Dolese, who pursued the idea of starting an insurer because he was frustrated with his own insurance options. As a coastal property owner, he says he got tired of paying higher and higher premiums and of seeing other property owners struggle with high insurance costs.
He said that “after screaming at my insurance agent for years,” he decided to do something about it.
His agent, John “Shorty” Sneed, president of the Gulfport, Miss., office of Stewart, Sneed, Hewes, a division of Bancorp South Insurance, is now one of the investors in the new company.
Dolese believes insurers are charging significantly more than they need to and that Coastal American will be able to help customers save.
A larger goal is to “get the industry to revisit the entire thought process if you insure people near the water’s edge… to rethink how to determine what’s the cause of loss.”
Mississippi Insurance Commissioner Mike Chaney welcomed the new competitor.
“The addition of Coastal American to the list of companies willing to come and write policies on the coast is yet another step toward the return of available and affordable insurance in the six coastal counties,” Chaney said.
“It is particularly gratifying that this is a Mississippi owned and operated company,” Chaney said.