Allstate Adds Maryland Coast to Its ‘No New Business’ List

December 22, 2006

Citing concerns that a warmer Atlantic Ocean will lead to more strong hurricanes hitting the region, Allstate Corp. will stop writing homeowners’ policies in coastal areas of Maryland.

Starting in February, the company will no longer offer new property insurance in all or part of 11 counties, mostly along the Chesapeake Bay. Allstate will continue to renew existing policies even in those areas, a company spokeswoman said.

“We have been looking at hurricane and storm projections, and we’re going to see a lot more severe storms further north on the coastline,” Allstate spokeswoman Debbie Pickford said. “We are working to minimize our risk.”

The move affects residents in Calvert, Dorchester, Somerset, St. Mary’s, Talbot, Wicomico and Worcester counties and parts of Anne Arundel, Charles, Prince George’s and Queen Anne’s.

Stung by losses from major storms including Hurricane Andrew in 1992 and Hurricane Katrina last year, insurance companies have been raising rates or dropping coverage in southern coastal areas, particularly Florida. With many scientists predicting an upturn in the frequency and intensity of hurricanes, the trend is spreading north.

Allstate also decided recently not to write new homeowner policies in all of Delaware, Connecticut and New Jersey and parts of Virginia. And it’s letting thousands of policies lapse in the Carolinas, New York and Texas.

In Maryland, Nationwide Mutual Insurance Co. decided two years ago to cap new business in coastal areas and not to write new policies in two ZIP codes near Ocean City.

Consumer advocates warn that smaller insurers might follow the lead of Allstate and Nationwide, which have more sophisticated risk-modeling techniques. If so, there will be less competition in the marketplace, and prices will go up.

“It has a tendency to push rates higher and make getting a policy more difficult, especially in coastal areas,” said J. Robert Hunter, director of insurance for the Consumer Federation of America and a former federal insurance administrator. “Allstate has made incredible profits, and I find their actions very offensive, and I think consumers ought to find it offensive.”

Still, Maryland residents, at least for now, still have numerous private insurers to choose from, industry experts and regulators say. Randi Johnson, associate commissioner for property and casualty at the Maryland Insurance Administration, said no policyholders have been dropped because of their closeness to the coast.

“We are nowhere near a crisis stage; people are able to get affordable insurance,” Johnson said. “It may be harder to find a carrier if you’re moving to the Eastern Shore. You might have to shop a little harder.”

Risk Management Solutions, a company that forecasts the risk of natural disasters for the insurance industry, changed its computer modeling this year and predicted that the Atlantic coast would see more hurricanes over the next five years. That means annual insurance losses could increase by up to 30 percent in the mid-Atlantic and Northeast, and 50 percent in the Gulf of Mexico, Florida and the Southeast, the company said.

Michael Kearney, a coastal scientist at the University of Maryland, said the Eastern Shore would be devastated by a direct hit from a major hurricane.

Insurers “see the handwriting on the wall,” he said. “If you have a category 5 hurricane in the Chesapeake Bay, it could dwarf what they saw in Katrina.”

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Information from: The (Baltimore) Sun,
http://www.baltimoresun.com

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