Allstate Corp., the largest property casualty insurer in Florida, has announced it will cease writing new homeowners’ policies in Florida until the state Legislature meets in December and decides what to do about sharing future storm risks.
Edward Liddy, Allstate’s chief executive officer said today that the company lost $1.06 billion as a result of hurricanes Charley, Frances, Ivan and Jeanne hitting the southern U.S., much of it in the company’s Allstate Floridian unit.
The losses, he said, “wiped out all the profits” the unit had made on its Florida policies since Hurricane Andrew hit the state in 1992. Insurance Services Office Inc., a New Jersey-based actuarial firm, estimates that the four hurricanes cost property and casualty insurers a total of $20.5 billion, just over the $20.3 billion that Andrew cost in inflation-adjusted terms.
Earlier this month, Allstate said it was tightening guidelines on new policies. Allstate, which is based in Northbrook, Ill., is one of the nation’s largest home and auto insurers.
Liddy said that while Allstate Floridian was renewing existing policies, it wasn’t writing new ones in most of the state until legislative issues were resolved.
“To keep adding capital until we know are relationship with the (state catastrophe) fund isn’t prudent,” he said.
The Florida legislature plans a special session next month to consider changes in property insurance laws. Florida’s governor, Jeb Bush, and the state’s chief financial officer, Tom Gallagher, are pushing to change a law that now lets insurance companies charge separate deductibles for damage from different storms in the same season.
Many of the state’s hurricane victims this year suffered through two or three storms and were hit for a large deductible for each. Liddy said that if the law is changed to limit insurance companies to collecting a single deductible per policyholder per season, then there should be a change in the way insurance companies are given access to the Florida hurricane catastrophe fund. The fund kicks in as a backup to insurance companies.
A proposal before the state legislature would lower the damage amount an insurance company must pay before it could get help from the catastrophe fund.
Liddy said that regardless of the outcome in the legislature, Florida policyholders likely will see rate increases, especially in central parts of the state that had not in the past been considered major hurricane risk areas.
He also said he expected Allstate Floridian would have to buy more reinsurance to spread risk. Liddy emphasized that Allstate hopes to remain in Florida and other fast-growing states.
Copyright 2004, The Associated Press