Captive Insurer Targets New York Affordable Housing Market

A new Vermont-based captive insurer is promising to provide insurance for New York affordable rental housing buildings at a time when advocates say coverage is difficult to afford or obtain.

The Milford Street Association Captive Insurance Co. will be owned by its member premium payers and will provide insurance only to New York affordable rental buildings that have a regulatory agreement limiting rents and receive public financing.

According to a New York Housing Conference March 2024 report, premiums for these landlords have been increasing at an annual rate of 21% over the last five years. Affordable housing advocates are concerned that rising insurance costs are restricting the development of new affordable housing and causing current operators to defer maintenance.

“This new collaboration offers a solution to the broken insurance market, a critical step to making sure New York encourages the creation and preservation of more affordable housing statewide,” said Rachel Fee, executive director of the New York Housing Conference.

Supporters of the idea contend that affordable housing properties with regulatory agreements have higher levels of maintenance and better risk mitigation programs than market rate and traditional rent regulated buildings, resulting in fewer and less expensive claims.

The captive aims to provide both primary (up to $1 million) and excess (up to $5 million above that) coverage. Milford Street says its premiums will be “significantly lower than what is available in the current market.” Insureds will also have to pay a one-time per unit returnable capital contribution and a small per unit association fee for startup and administrative costs.

Milford Street is domiciled in Vermont and will be regulated by that state’s insurance regulator.

The announcement of the new captive insurer came about two weeks after New York DFS regulators issued guidance to insurers regarding affordable housing properties. Under the guidance, commercial insurers are prohibited from inquiring about or making coverage decisions based on a property’s status as an affordable housing development or a tenant’s source of income.