Cape & Islands News

More insurers depart both US coasts

We are still (and will always) pay for Katrina
"There is a potential market failure here"

The Washington Post reports today that more insurers are giving up offering property  insurance coverage on both US coasts one month before the start of the next hurricane season:

Alarmed at the sharply rising cost of hurricanes and other disasters, home insurers are pulling back from some U.S. coastal markets, warning of gathering financial storm clouds over how the United States pays for the damage of catastrophe.

The development is yet another legacy of Hurricane Katrina, whose mounting toll of destruction along the Gulf Coast has crystallized a growing industry debate about the combined effect of climate trends and population growth in coastal areas. Some believe the two are creating a risk of losses so large that insurers could be pushed to the breaking point, leaving the government and taxpayers holding the tab for the next disaster.

Since Aug. 29 -- when the hurricane made landfall along the Gulf Coast -- Allstate Corp., the industry's second-largest company, has ceased writing homeowners policies in Louisiana, Florida and coastal parts of Texas and New York state. The firm has stopped underwriting earthquake coverage in California and elsewhere. Other firms have pulled back from the Gulf Coast to Cape Cod, notifying Florida of plans to cancel 500,000 policies.

The complete story here goes on to quotes Robert E. Litan, a senior fellow at the Brookings Institution who is working with state regulators in California, Florida, Illinois and New York on a plan to reshape catastrophe insurance saying,  "There is a potential market failure here, if not already an actual market failure at work.  If we have another hurricane season this year like we had last, I wouldn't be surprised if you see a stampede of insurers trying to get out."