Insurance coverage for affluent homeowners is making headlines, particularly in regions prone to weather-related damage. The withdrawal of major insurance carriers from these markets has left thousands of people uncertain about coverage and worried about the possibility of non-renewal*.
As climate change continues to exacerbate the frequency and intensity of natural disasters, many insurers are choosing to stop writing new policies or, even worse, non-renew existing policies so they can exit from high-risk areas.
However, amidst these challenges, there is a glimmer of hope in the form of Excess and Surplus (E&S) lines insurance, which offers a potential solution if you are unable to obtain coverage through traditional means.
THE EXODUS
The departure of major insurance carriers like State Farm, Allstate, American National, and The Hartford from markets such as California and Florida sent shockwaves through affected communities. Reasons range from increased exposure associated with wildfires, hurricanes, and other natural disasters to financial challenges arising from litigation and regulatory requirements.
State Farm's decision to non-renew thousands of policies in California shines a light on the state’s growing concerns about access to affordable insurance. Similarly, AAA's announcement of discontinuing some homeowners’ policies in Florida adds to the strain felt by residents in a state already struggling with low capacity and rising premiums.
THE IMPACT
As carriers exit targeted areas, available homeowner policies become scarce. If you are lucky enough to find alternative coverage, it’s often at a significantly higher premium or with reduced terms. This is where a broker with access to specialty carriers can leverage long-standing relationships on your behalf.
Less obviously, lack of availability can hinder property transactions, as mortgage lenders typically require proof of insurance. Without easy access to homeowner policies, you may find it challenging to buy a new home or refinance your mortgage. On a related note, this is becoming a critical issue if you manage an extensive rental property portfolio, as tenants who are leasing coastal condos are equally hard-pressed to find coverage.
YOUR COMMUNITY
Insurance is a vital component of local resilience and economic stability. Without it, communities feel the full financial burden of rebuilding after disasters which strains both businesses and individual taxpayers. Absence of insurance also deters new investment and development in high-risk areas, aggravating economic disparities and hindering efforts to promote sustainable growth.
RISE OF E&S
In times of uncertainty, innovative solutions tend to emerge. This is where Excess and Surplus (E&S) lines insurance enters the conversation. E&S policies provide coverage for risks deemed too high, complex, or unusual for conventional insurers to underwrite.
It’s not a slam dunk, however, as capacity issues also plague the E&S market. When demand exceeds supply in locations where few carriers offer coverage, premiums rise unfettered by competition.
The good news is that E&S lines operate in a regulated yet flexible market, allowing for customized coverage that can be tailored to your specific needs. While they may not be as flexible with payment options as traditional insurers, E&S policies can offer a lifeline – albeit an expensive one - if you are affected by the departure of mainstream carriers.
NEXT STEPS
Happily, there are actions you can take if you are concerned about non-renewal of your homeowner’s policy. First, contact your current insurance broker and inquire about alternative coverage options, securing insurance from other carriers, and viability of state or federal insurance programs specifically designed for high-risk areas.
Second, you should focus on improving your risk position with underwriters by installing water and heat sensors, adjusting landscaping around structures, and updating roofing/siding with flame retardant materials. When you take proactive measures, you can better navigate local market carrier departures while safeguarding your home (and prized possessions) against the unexpected.
Third, contact Lockton Private Risk Solutions (opens a new window) if you have been notified about a non-renewal or policy cancellation. As a result of our volume and long-term E&S relationships, we have access to coverage solutions that are hard to find elsewhere. We’re here for you every step of the way, from risk mitigation recommendations through complete restoration of your luxury lifestyle.
For more information about Private Risk Solutions, visit our webpage (opens a new window) today.
*The term “non-renewal” is not the same as “cancellation.” While policies can be cancelled due to claims history or other factors, the term non-renewal as used in the situations above describes when a carrier decides to exit a specific market for reasons unrelated to individual policyholder history, such as a change in corporate guidelines.
The information provided in this article is for educational purposes only and should not be considered professional advice. Please consult with a Lockton representative for information regarding specific insurance products and services.