It was reported last month that Allstate Corp. and Alfa Mutual group will cumulatively drop wind coverage on 14,000 homeowner policies in Mobile and Baldwin counties over the next 18 months. The cuts will affect as many as 7% of all homeowners in the two counties. The moves are another blow to Alabama’s coastal insurance market. Since Hurricane Ivan, which hit in 2004, Allstate, Alfa and State Farm Fire and Casualty have either dropped or planned to drop wind coverage, or all coverage, on nearly 41,000 policies.
Allstate will essentially stop insuring against wind damage in Mobile and Baldwin counties if it drops coverage on 9,000 existing policies. Since Hurricane Ivan, Allstate has announced four waves of cuts, totaling 30,000 homeowners. State officials said Allstate will have fewer than 500 wind policyholders in the two counties. Alfa, Alabama’s No. 2 property insurer, will retain some of its wind policyholders in Mobile and Baldwin counties. It was reported that Alfa will still cover more than $7 billion in all kinds of property.
Cuts to Alabama policyholders will apparently take effect as policies come up for renewal. It’s estimated this will take a year to cycle through. By rule, policyholders who are losing coverage must be notified 120 days before renewal dates. Customers being dropped were said to have been chosen based on location, type of construction, amount of coverage and other factors.
State Farm, based in Bloomington, Ill., is the only traditional state-regulated insurer that has been accepting new business in Mobile and Baldwin counties in recent months. However, the state’s largest property insurer limits how many new customers it will take. Displaced policyholders may have to look to surplus lines insurers, which are lightly regulated, or to the Alabama Insurance Underwriting Association, the insurer of last resort known as the “Beach Pool.” Both those options are typically more expensive than traditional markets. There has been a significant increase in Beach Pool policyholders. The pool added almost 8,000 new residential policyholders in the 18 months ended in October, more than doubling in size to 14,406 policies.
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