Assurant to Pick Up Policies as Nationwide Exits Federal Flood Insurance Program

By | April 26, 2016

Nationwide will start winding down its status this May as a “Write Your Own” carrier within the federal government’s National Flood Insurance Program. Assurant said it formed an agreement with the insurer to fill the gap.

Nationwide said it plans to begin transitioning out of the NFIP on May 16; the decision amounts to a revised strategy, Nationwide spokesman Eric Hardgrove told Carrier Management via email.

“Nationwide has made this strategic decision to focus on its core products,” Hardgrove said. “We are making this announcement now to give impacted agents/customers time to fully understand this change”

Financial details were not disclosed. But Assurant said it will acquire the opportunity to renew about 250,000 affected policies reflecting approximately $230 million in written premium within the NFIP.

Assurant, a property insurer and provider of lifestyle specialty protection products, said it is currently the second largest NFIP flood insurance provider nationally. Gene Mergelmeyer, president and CEO of Assurance Specialty Property, said that the transaction will “continue to build on our leadership position in the flood insurance market.”

“We will work with Nationwide to ensure a seamless transition for policyholders and agents, and look forward to providing them with excellent service,” Mergelmeyer said in prepared remarks.

As part of the deal structure, there will not be any changes to existing Nationwide NFIP benefits or policies, which will stay in effect through their renewal dates. When renewal takes place, existing NFIP policyholders will have the option to renew through Assurant. Also, Nationwide agents can now regularly offer NFIP policies through Assurant.

Last June, Assurant decided it would leave the health insurance market to focus more on its housing and lifestyle specialty protection business.

Launched in 1983, the Write Your Own program allows participating property/casualty insurance companies to write and serve the standard flood insurance policy issued for the NFIP in their own names. Participating companies receive approximately 30 percent of premiums for expenses and commissions on WYO policies, an amount some officials have called too high. The federal government retains responsibility for underwriting losses.

Federal officials are reviewing the WYO program in light of criticism it pays insurers too much and of how some Superstorm Sandy claims were handled.

Last June, Brad Kieserman, the NFIP’s outgoing director, called the program, which is $23 billion in debt to the Treasury, a “melting iceberg” that is incapable of properly managing its various players including the private insurance carriers that sell policies and handle claims, often by delegating work to subcontractors.

Congress is also weighing a proposal to encourage more private insurers to offer flood insurance. The House is expected to vote this week on a flood reform bill that passed the Financial Services committee last month.

Seventy-seven (77) insurers now participate in the WYO program, although the roster keeps changing. In 2013, The Travelers ended its participation, selling its WYO policy renewal rights interest to Assurant. State Farm dropped out in 2010, leaving behind an estimated 800,000 policies. Last August, Utica First Insurance Co. in Oriskany, New York, announced it was withdrawing from WYO. However, Prepared Insurance Co., a Florida property/casualty carrier, was approved to participate in the WYO.

Hollmer is editor of CarrierManagement.com, where this article was originally published.

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About Mark Hollmer

Hollmer is a veteran business journalist and editor of CarrierManagement.com's daily e-newsletter for the property/casualty insurance industry C-suite. He may be reached at mhollmer@carriermanagement.com. More from Mark Hollmer

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