NU Online News Service, July 10, 2:15 p.m. EDT

A small Florida-based reciprocal insurance company that specializes in coverage of expensive, storm-resistant shore homes is expanding into New Jersey, the firm said yesterday.

The announcement by Fort Lauderdale-headquartered PURE Risk Management LLC brings the number of states the company operates in to four. It also insures property in New York and South Carolina and is licensed for Connecticut and Washington, D.C.

A reciprocal insurer is a risk-pooling entity whose participants are known as "subscribers," who agree to exchange insurance contracts among themselves to achieve risk pooling. PURE members pay a surplus contribution of 10 percent of their high-value homeowners' premium and 4 percent of their premium for all other policies, for each of the first five years of membership.

Martin Hartley, executive vice president and chief operating officer for the company, said the company has been successful because in targeting hurricane-exposed areas it doesn't have the aggregation of risks in a location that many insurers have built over time.

He said the company's sophisticated underwriting uses the most up-to-date "views of how homes are damaged in windstorms and we employ those in our pricing."

One of the key things learned from recent hurricanes, said Mr. Hartley, is that "strong winds will damage big homes less than small homes. We factor in characteristics that maybe others [in the insurance industry] don't."

PURE, he explained, takes into account such factors the shape of the building's roof and how new it is as well as how recently the home went up and if it employed the newest building codes.

He said the company targets some homeowners that it views as paying too much in premium, and avoids others "not paying enough."

A lot of carriers, he said, if they looked at their business "would see older homes, poorly elevated in flood zones. We're saying, 'If you're elevated and have a good roof, allow us to say you're a better than average risk.'"

Mr. Hartley said the company distinguishes "hugely" between those homes set right on the water and those with a good amount of setback from the beach whereas in New York, for example, "some companies have one rating territory for the whole of Suffolk County" on eastern Long Island.

PURE noted that in New Jersey many other insurers in the state currently offer limited coverage or have stopped writing policies, particularly along the coast.

The company said it plans to provide "New Jersey members (policyholders) with significant savings on their homeowners insurance, much like it has done in the other states it serves."

In addition to homeowners insurance, PURE provides automobile, jewelry, art, personal liability and watercraft insurance to wealthy individuals and families.

Ross Buchmueller, PURE president and chief executive officer, previously founded AIG Private Client Group and served as its president until 2006 when he and his partners established PURE.

"PURE believes that the owners of large, well-built, high-value homes in New Jersey deserve access to high-quality insurance and shouldn't necessarily have to pay higher premiums."

He said, "We recognize that many prospective members are attracted to PURE because of the savings we offer; however, we are able to retain a solid membership base and grow our reputation because of our dedication to exceed claims service expectations and our commitment to help our members develop sound practices to protect their homes."

PURE said its coverage goes beyond repair costs or replacing damaged property. The firm said it will contribute up to $2,500 to help prevent large losses from recurring and to control the long-term cost of risk.

As an example, it mentioned that if lightning causes an electrical surge and damages electrical appliances valued at $10,000 or more, PURE may cover the replacement of the appliances and contribute to the installation of a lightning-suppression system to help prevent similar incidents.

PURE, Privilege Underwriters Reciprocal Exchange, reports it has more than 3,700 members and about $100 million of surplus capital.

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