Allstate Dropping Quake Insurance

Allstate Insurance, which has stopped writing coverage for homeowners in many hurricane-vulnerable areas, said yesterday they will no longer cover earthquake damage wherever they are legally allowed to drop the coverage.

Some 352,000 policyholders nationwide will be affected by the decision not to renew the coverage, said spokesman Mike Trevino.

He said the company's decision will mean it gives up $60 million premium from the earthquake endorsement portion of its homeowners policies.

Mr. Trevino said it was possible that company would see a further reduction in premiums written from homeowners who decide to switch to another carrier altogether.

Allstate, said Mr. Trevino, is attempting to place its homeowners policyholders' earthquake risk with other carriers. In the case of customers in Washington State, he said the company is arranging for customers to get coverage through the specialty carrier GeoVera of Fairfield, Calif.

The insurer is non-renewing because “as we have looked at the exposure, that's not a risk we want to continue to insure.” Earlier this year, as a result of what the carrier said was a desire to limit hurricane exposure, Allstate stopped renewing home insurance business in New York City, the adjacent northern suburb of Westchester County and all of Long Island, N.Y.

The company currently has 407,000 policyholders that have earthquake coverage. Mr. Trevino said Allstate is continuing to provide 55,000 customers in the states of Connecticut, Kentucky, Florida, Pennsylvania, New Hampshire, Rhode Island and New York with quake coverage.

He said in those seven states the insurer is having conversations with regulators, or has not made a decision on what action it will take. He said Kentucky mandates the quake coverage.

In California, insurers that sell homeowners insurance are required to provide coverage as part of the California Earthquake Authority, with participation based on their share of the market, so policyholders will not be affected there, according to Norman Williams, speaking for the state's insurance department.

Mr. Trevino agreed that “our actions do not impact California and we will continue to participate in the CEA.” Californians who have Allstate coverage through CEA will remain covered, he said. The policies are not considered name offerings, “CEA is on the risk not Allstate,” said Mr. Trevino.

Oregon regulators are not immediately concerned by the Allstate decision, said Insurance Division spokesman John Piper. “It appears Allstate is the only company that is going in this direction, and doesn't appear at this point to be a trend,” he said.

However, Stephanie Marquis, speaking for Washington Insurance Commissioner Mike Kreidler, said he is very concerned that if one company takes such an action, more might follow.

Bill Marutsos, vice president, Aon Construction Services Group in Irvine, Calif., said that for highrise condominiums and other vertical home construction in California, quake coverage is not readily available at reasonable price.

He noted that since insurers' ability to provide the coverage is limited by their reinsurance, capacity is likely to continue shrinking. Since last year, he said, the cost of coverage has increased 50-to-60 percent with reduced limits.