Allstate's coastal customers among those who need a new way to insure against hurricanes

Allstate is the latest insurer to announce it is dropping the coverage in the wake of last year's hurricanes.

The state's second-largest insurer of homeowners said Thursday that starting Sept. 15 it won't renew windstorm coverage for 65,000 policyholders in coastal counties, as well as a sliver of Harris.

The company intends to move the customers into the Texas Windstorm Insurance Association, a state pool created to take on the riskiest properties along the coast that can't find insurance in the private market.

"Allstate hasn't utilized the TWIA option as much as our competitors have, but in the face of increasing risks, we feel we need to utilize this option," Allstate spokesman Joe McCormick said.

Rates for windstorm coverage vary, he said, but the wind coverage portion of an Allstate homeowner policy can be as much as 40 to 70 percent of the overall premium.

How to get coverage
Homeowners can opt to get windstorm coverage, which most mortgage lenders require for homes along the coast, by switching to another company that sells both windstorm and home coverage.

Or they can buy it from the state wind pool, where average annual premiums are $787. The switch to the wind pool, however, won't be automatic. Consumers must have their homes inspected before receiving coverage. To give policyholders time to set up inspections, Allstate plans to send notices to consumers 90 days before their renewal date.

About 15,000 Allstate policyholders already have coverage with the pool.

Also, for homeowners living one or two counties inland, Allstate is bumping deductibles for claims made in the wake of hurricanes to a flat 2 percent of a loss ��" a move it made in March for new customers in those counties.

Earlier this year, the company also stopped selling home insurance to new customers one county inland, in such counties as Fort Bend and Liberty.

Allstate insures itself
The company also bought $2 billion in insurance for itself to cover potential catastrophic losses nationwide and an additional $100 million in insurance just for losses in Texas, where the company has about 750,000 policyholders.

The cost of the so-called reinsurance hasn't been factored into policyholder rates yet, but Allstate plans to make a rate-hike request this summer, McCormick said.

The rate-change request is among more than 300 property insurance rate filings the company plans to make nationwide in catastrophe-prone states as the company offsets reinsurance costs.

"There will be a very minimal increase in other parts of the state, where there is catastrophe exposure because of hailstorms," McCormick said. "But the bulk of it will be in the coastal areas."

Thousands of homeowners will lose their windstorm insurance coverage this year as insurance companies continue to curb their exposure to hurricane losses along the Texas Gulf Coast

Other companies that have notified the Texas Department of Insurance they are cutting back or dropping windstorm coverage along the coast this year include American National Property and Casualty, Texas Farm Bureau Insurance Co., Horace Mann Insurance, Beacon Insurance, and Middle States Insurance Co.

State Farm and Farmers still sell some windstorm coverage along the coast, though they also have customers insured by TWIA, spokeswomen for the companies said.

Will pool dry up?
More companies have been shifting chunks or all of their windstorm coverage to the pool in recent years, said Jim Oliver, chief executive officer of the windstorm association. More than half of the pool's insured residential property is in Galveston County.

Oliver said the association would be able to handle day-to-day costs of the new load ��" the association has 112,000 residential and commercial policies.

But it's the claims following a hurricane that worry him.

"We can pay all the losses, but who ends up paying is what it amounts to," Oliver said.

At present, the windstorm pool has $1.3 billion in funding based on assessments on insurers, reinsurance and past premiums.

But losses beyond $1.3 billion would be covered solely by insurance companies, which would get credits on state taxes to offset additional payments, ultimately shifting the burden to taxpayers.

The pool requested a 19 percent rate increase earlier this year, though the state Legislature implemented a 10 percent rate cap on annual increases years ago.

Jim Hurley, a spokesman for the Insurance Department, said the insurance commissioner will have a decision soon.
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By PURVA PATEL
purva.patel@chron.com

Copyright 2006 Houston Chronicle